Major changes to payroll costs
A reminder about April’s increase in minimum wage and rise in employers’ National Insurance.
The government announced their plans to increase both the National Minimum wage and employers’ National Insurance Contributions (NICs) in October 2024.
We want to make sure you have the information you need and have prepared your business for these changes before they take effect in April.
Here’s a reminder of what’s changing.
Minimum Wage increase
From 1 April 2025, the National Minimum Wage will rise.
- For workers aged 21 and over - £12.21 per hour (up from £11.44).
- For those aged 18-20 - £10.00 per hour (up from £8.60).
- For under 18 but over compulsory school age - £7.55 per hour (up from £6.40).
- For apprentices - £7.55 per hour (up from £6.40).
What this means for you
These increases might mean higher payroll costs. Especially if your business employs lower-wage workers.
If you haven’t already, here are some actions you might need to take ahead of the increase.
Review your payroll and budget
Calculate the new wage costs and adjust your budget.
Communicate with staff
Let your employees know about the upcoming changes. This’ll avoid any confusion.
Use payroll software
BrightHR offers payroll software that can help manage these changes.
Employers’ National Insurance rise
From 6 April 2025, employer National Insurance contributions (NICs) will increase. They are increasing from 13.8% to 15%. This change might have a big impact on your payroll expenses.
If you haven’t already, here are some actions you might need to take ahead of the increase.
Review your payroll costs
Calculate the exact increase in NICs for your business.
Think about salary sacrifice schemes
Offering benefits like pension contributions might reduce taxable earnings and NICs.
Factor in NIC costs when hiring
If you’re planning to recruit, make sure to factor in that there might be an extra tax burden.
Use payroll software
This can help you calculate costs, stay compliant, and manage payroll.
Other things to think about
The rise in NICs and minimum wage comes with other financial pressures. Such as higher business rates and new employment laws.
To manage these increased costs you could look at reducing costs in other areas or changing your hiring plans.
Check out our learn page for more practical content that could help you with this.
Expert advice
Janine Lennon is Head of Payroll Services at BrightHR. She suggests, ‘It's important for businesses to avoid age discrimination to keep costs in check. Favouring younger employees with more paid hours can put you at risk of violating the Equality Act 2010. Instead, concentrate on boosting productivity within your team and addressing any underperformance promptly.’
Support
This is just one example of the many changes that can impact your business.
Careful planning and the right tools can help you manage changes and keep things running smoothly.
BrightHR can support you. They can offer expert HR, health and safety and people management advice and software to make sure you stay compliant. This could even free up some of your time to focus on other important areas of your business. Wouldn’t that be nice.