Upcoming Employment Law Changes: National Minimum Wage, Statutory Payments, and National Insurance Updates from April 2025
Minimum Wage and Living Wage Increases
From 1 April 2025, the government will implement new rates for the National Living Wage (NLW) and National Minimum Wage (NMW):
• The NLW, now applicable to workers aged 21 and over, will increase to £12.21 per hour.
• Workers aged 18–20 will see the NMW rise to £10.00 per hour.
• For 16–17-year-olds and apprentices, the minimum hourly rate will increase to £7.55.
These changes are part of the government’s ongoing efforts to ensure fair pay in line with inflation and living costs. Employers must ensure these new rates are applied correctly and promptly.
Updated Statutory Payment Rates
Effective 6 April 2025, the following changes to statutory payments will come into force:
• Statutory Sick Pay (SSP) will increase from £116.75 to £118.75 per week.
• Family-related statutory payments, including maternity, adoption, paternity, shared parental, neonatal, and parental bereavement pay, will rise from £184.03 to £187.18 per week.
Ensure payroll systems are updated to apply the correct rates from this date.
Changes to National Insurance Contributions (NICs)
From 6 April 2025, the following NIC changes will apply:
• The Employer NIC rate will rise from 13.8% to 15%.
• The threshold for employer NIC liability will drop from £9,100 to £5,000 per employee per year.
• The Employment Allowance will increase from £5,000 to £10,500, and the existing £100,000 cap on employer NIC bills will be removed, expanding eligibility.
• The Lower Earnings Limit (LEL) will rise to £6,500 annually (or £125 weekly).
These changes will affect employment costs, and businesses should review their budgets accordingly.
Public Sector NIC Rebate – Important Clarification
While public sector employers (including the NHS) will receive compensation for the rise in NICs, recruitment agencies supplying staff to public sector bodies will not receive this rebate. Agencies may need to reflect this in pricing and contract reviews.
Frequently Asked Questions
Q: What happens if the National Minimum Wage increase falls in the middle of a pay period?
A: The new minimum wage rates apply from the start of the first full pay reference period that begins on or after 1 April 2025. If a worker’s pay reference period runs from 14 March to 14 April, then the old rate applies to that entire period, because it began before 1 April. The new rate would apply from 15 April, the start of the next pay reference period. Employers do not need to prorate or split the pay reference period.
Q: Do I need to issue new contracts when rates change?
A: Not necessarily. If employment contracts specify that pay will meet or exceed the statutory minimum, an updated payslip reflecting the new rate will generally suffice. However, it’s good practice to confirm pay increases in writing to affected staff.
Q: Will these changes affect salaried staff?
A: Yes, if salaried staff are paid at or near minimum wage levels, employers must ensure their average hourly pay (based on annual salary and working hours) meets or exceeds the new statutory minimums. Failure to do so can result in underpayment.
Q: Can I use the Employment Allowance automatically if I’m newly eligible?
A: No — while more businesses will qualify under the new rules, you must still actively claim the Employment Allowance through your payroll software or HMRC portal.
Q: How should I prepare if my business supplies workers to public sector bodies?
A: As recruitment firms won’t be reimbursed for the NIC increase (unlike public sector employers), now is the time to review charge rates, client agreements, and margin structures to accommodate the added cost.
Key Actions for Employers
• Update payroll systems to apply new NMW/NLW and statutory payment rates from April 2025.
• Check staff on fixed salaries to ensure their hourly pay remains compliant with the new minimums.
• Notify employees of any applicable changes to pay.
• Budget for increased employment costs, especially NICs, and explore whether your business can now benefit from the expanded Employment Allowance.
• If relevant, review contracts with public sector clients to reflect changes in cost structures due to NIC rebate ineligibility.