Nov 2024
It was predicted that the Budget would be jam packed being the first Labour Budget in 14 years - and there was certainly plenty in store for the employment sector. Here we look at some of the key changes that were outlined and how employers might be affected.
Minimum wage increases
The National Minimum Wage and Living Wage increases will come into effect from 1st April 2025 and employers will need to get ready for these changes.
The National Living Wage, paid to workers aged over 21, will rise to £12.21 per hour - an increase of 6.7%. More generous pay rises were applied to the National Minimum Wage, paid to workers aged 18-20, which will go up to £10.00 per hour from 1st April - a rise of 16.3% increase from the previous rate. We have illustrated the changes in the table below:
|
|
NWM Rate 1 April 2025
|
Increase (£) |
Increase (%) |
|
National Living Wage (21 and over) |
£12.21 |
£0.77 |
6.7 |
|
18-20 Year |
£10.00 |
£1.40 |
16.3 |
|
16-17 Year |
£7.55 |
£1.15 |
18.0 |
|
Apprentice Rate |
£7.55 |
£1.15 |
18.0 |
|
Accommodation Offset |
£10.66 |
£0.67 |
6.7 |
Source: https://www.gov.uk/government/publications/minimum-wage-rates-for-2025
While employees will no doubt welcome the news of getting a pay rise, employers might need to think about how they will cover those costs - especially as there were other increases announced that will affect employers from next April.
NIC increases for employers
Perhaps the most controversial point was surrounding the National Insurance Contribution (NIC) increases for employers. From April 2025, employers will be required to pay 15% NIC - an increase of 1.2% on what it is currently. Labour say that these increases will be used to fund investments in public services, like the NHS, schools and social care.
Among our clients, smaller employers are worried about how they are going to fund the NIC increases and whether or not that might lead to a recruitment or pay freezes. Larger businesses too are concerned about significant rises in payroll expenses, which may also impact their hiring figures in the new year.
UK employment allowance
There was some relief for employers in the form of the Employment Allowance. Currently, there has been a cap of £5,000 to help with the costs of NICs, and from April next year, that cap will increase to £10,500 - so that support will double, and could be of particular benefit to smaller businesses.
In addition to these measures, the government has removed the £100,000 eligibility cap on secondary Class 1 NIC liabilities, which will broaden the number of businesses that can qualify - and offer further support to the businesses that might need more help to absorb the higher cost of the increase in NIC.
If you would like any further advice about how the recent Budget announcements might affect you or your business, contact Downs Solicitors to see how we can help.
