As you will no doubt by now have read, Chancellor Rachel Reeves has unveiled significant changes that will impact both employers and employees in her first Autumn Budget. Below we have broken down the key announcements affecting wages and National Insurance contributions and outline how these could impact both employers and employees respectively.
National living wage increases
Starting in April 2025, minimum wage rates will rise significantly:
- Employees over 21: Wage rises from £11.44 to £12.21 per hour (6.7% increase)
- 18-20-year-olds: Wage soars from £8.60 to £10 per hour (16% increase)
- Apprentices: Wage climbs from £6.40 to £7.55 per hour (18% increase)
These changes will benefit over 3 million workers. The Government aims to move towards a single adult rate and ensure wages keep pace with living costs.
What does this mean for employers?
Employers must update employment contracts by April 2025 to comply with these new rates. Whilst this may seem some time away, with Christmas shortly upon us, this period will no doubt pass quickly and we encourage you to start to take steps on this now to ensure your business is fully prepared.
National Insurance changes
While employees won’t technically see these changes, employers face new National Insurance contribution requirements, as outlined below:
- Employer contribution rates will increase from 13.8% to 15%.
- The National Insurance threshold will decrease from £9,100 to £5,000.
- The worker’s allowance will increase from £5,000 to £10,500
However, this won’t come into effect immediately, which means 865,000 employers won’t pay any National Insurance next year. However, this increase has led some employers to be concerned about recruitment, etc and so there may very well be an indirect knock-on impact to employees.
Stay informed, stay compliant
These announcements follow recent developments this year with the Employment Rights Bill and Worker Protection (Amendment of Equality Act 2010) Act, both of which are changing the employment law landscape. With employment laws constantly evolving, it’s crucial to stay up to date and review your business policies and procedures.
What should you be doing as an employer?
- Review current pay structures: Assess how these changes will affect your existing wage scales and whether adjustments are needed to maintain internal equity. If you have tiered pay structures, ensure compliance across all levels.
- Update contracts and employee communications: Adjust employment contracts to reflect the new minimum wage levels. Plan how you will communicate these updates to staff clearly and positively, outlining the benefits and reasons behind the adjustments.
- Engage payroll and financial advisors: Consulting with payroll specialists, or financial advisors will be beneficial to ensure a smooth transition, particularly for businesses with complex payroll structures.
- Explore financial assistance options: For any business but especially small businesses feeling the impact, review eligibility for Government grants or other forms of financial support. The enhanced employment allowance may provide significant relief.
- Invest in employee retention: With the wage increases, consider employee engagement strategies to boost retention. High turnover can increase costs, so maintaining a motivated, satisfied workforce is important.
- Review current policies: to make sure the business is compliant with all the new legislation (especially the ones which came into place in October 2024 and / or getting itself ready for changes on the horizon.
This article is for information only and does not constitute legal/financial advice. Please contact us for advice tailored to your specific position. Some of the content presented on our website has been generated with the assistance of Artificial Intelligence (AI). We ensure that all AI-generated content meets our high standards for accuracy and relevance.
