Like every year, the National Living wage in the UK will rise in April. The new wage, which reflects the cost of living, comes into effect on April 1st. While the minimum wage always increases annually, this year’s increase is slightly different. You should track changes to pay, employer’s national insurance, and employment allowance.
Make Work Pay
Before the Labour government came into power, the ‘Make Work Pay’ plan was a key part of their manifesto. The mission was to secure workers’ jobs, put more money in working people’s pockets and provide rights to worker unions. Achieving something on this scale is not something that can be done overnight. Instead, we see a slow but regular implementation of legislation to make progress.
Minimum wage
This year’s National Living wage increase will be 6.7%, a notable step towards Labour’s ‘Make Work Pay’ manifesto. For a full-time minimum wage worker, this means an increase worth £1400 annually. The pay boost will benefit over 3 million workers in the UK, including apprentices.
New minimum wage rates
|
Employee Band |
National Minimum Wage rate |
Increase (£) |
Increase (%) |
|
Apprentice |
£7.55 |
£1.15 |
18% |
|
16-17 years |
£7.55 |
£1.15 |
18% |
|
18-20 years |
£10.00 |
£1.40 |
16.13% |
|
National Living Wage (21+) |
£12.21 |
£0.77 |
6.7% |
- The lowest paid 21-year-old working 37.5 hours per week will earn £23,809.50 per year.
- Employers NI will rise from £13.8% to 15%
- Employers pension contribution is £714.29
The actual investment of a minimum wage employee will be £28,095.22 per year
Why this matters for businesses
Stay compliant with the law: Minimum wage is not just a suggestion for businesses—it’s the law! You can’t pay employees less than the minimum wage for their age or role, and doing so can lead to serious legal trouble. That’s before getting into the ethical issues with underpaying staff.
Financial planning- If your company’s business costs aren’t correct, it can lead to difficulty when financial planning. This could cause overspending elsewhere, thinking you have available funds. Organising backpay for employees then becomes a headache you’d rather not have.
Employee retention: Your employees understand the importance of their work. They know what it means to your business and clients. This is why eight out of ten workers said they “would not work as hard” if they knew they were underpaid. Ninety per cent would actively resent their employer, while 85% would leave their job and seek other work. Your employees shouldn’t feel undervalued and definitely shouldn’t feel like they have no choice but to leave their roles.
Competitive practices—An ethical business can attract valuable clients and top talent. The minimum wage was created with workers’ rights and moral standards in mind. Yes, you have to pay these rates by law, but enthusiastic compliance can portray your business as a positive workplace.
Why this matters for employees
Fair pay and living standards—The increase in NMW can be attributed to the rising cost of living. More people are struggling to pay their bills and need support to afford necessities.
Career growth: Employees see higher wages as an incentive to work harder. Financial stability and additional motivation can encourage workers to engage in personal development through further education, training courses, and skill development. By investing in your employees, you’re investing in your company’s success.
Additional changes
Employers’ National Insurance (NI) is currently charged at 13.8% on income over £9,100 per employee. In April 2025, this rate will increase to 15% on income over £5,000 per employee. This means higher tax payments, and more employers must pay this tax.
Starting April 6th, the Employment Allowance will increase from £5,000 to £10,500. This will help eligible employers reduce their yearly National Insurance liability. The allowance aims to help employers pay less national insurance. This can help independent businesses invest more into their businesses while assisting larger businesses secure their workforce’s jobs.
Navigating minimum wage pay can be sensitive, like any discussion around pay. By outsourcing your HR services, you can protect yourself and your employees from malpractice. Including our expert team in these meetings can ensure your employees are comfortable while you don’t overstep any boundaries.