📌 National Insurance & Minimum Wage Changes: What They Mean for Employers in 2025
- Aleksandar Davidov
- Oct 13
- 2 min read
If you employ staff in the UK, two recent changes deserve your close attention:
The rise in employer National Insurance Contributions (NICs)
The increase in minimum/living wage rates
Here’s how these shifts affect your business (and what to do about them).
🏛 Recent Changes: What You Need to Know
1. Employer National Insurance (NIC) Changes (from 6 April 2025)
The employer NIC rate (secondary Class 1) is increasing from 13.8% to 15%.
The secondary threshold (the salary level at which employer NIC is payable) is being lowered from £9,100 to £5,000 per annum.
This means more of your employees’ earnings will attract NICs — which raises your employment costs.
On the flip side, the Employment Allowance is being increased (from £5,000 to £10,500) to help offset some of the burden for eligible employers.
2. Minimum / Living Wage Increases (from 1 April 2025)
For workers aged 21 and over, the National Living Wage rises from £11.44 to £12.21 per hour.
For those aged 18–20, the rate jumps from £8.60 to £10.00 per hour — a significant increase.
For 16- to 17-year-olds and some apprentices, the rate moves from £6.40 to £7.55 per hour.
📈 How These Changes Impact Employers
Higher wage bills, more hours will be paid at the new minimum / living wage, pushing up payroll costs.
Increased NIC costs across more earnings because the threshold is lower, you'll pay NICs on previously exempt salaries.
Margin pressure, especially on low-margin businessesBusinesses with tight margins may struggle to absorb the extra cost.
Wage compression issuesIncreases in minimum rates may narrow the pay gap between entry-level and more experienced staff, creating pressure to adjust other salaries upward.
Potential shift in workforce mix or hiring strategy. Some employers may reconsider hiring younger or part-time staff, or invest in automation, to manage costs.
More sectors feel the pinchIndustries already relying heavily on low-paid labour (retail, hospitality, etc.) are especially vulnerable.
✅ What Employers Should Do
Re-model staffing costs - Run updated payroll projections to see how your costs change under the new rates.
Review wage structures - Ensure roles, pay bands, and benefits remain balanced — avoid unintended inequalities.
Check eligibility for Employment Allowance - Use the increased allowance to reduce your NIC burden (if you qualify).
Communicate with your team - Ensure staff understand why changes are happening, and how it affects wage and growth plans.
Explore productivity & efficiency gains - Use tech, automation, or process improvements to reduce reliance on additional staff hours.
Consider phased adjustments - Especially if cash flow is tight, you may need to introduce changes gradually or seek cost savings in other areas.
👉 Bottom line: The combined effect of higher employer NICs and rising minimum wages means higher labour costs for businesses. But with planning, clarity, and strategic adjustments, you can manage these changes rather than be surprised by them.
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