National Minimum Wage, The National Living Wage and the Real Living Wage increases – what does it mean for you?
April 2025 is all about wage rises. If you want to be on the front foot and want to understand how these increasing will impact your business, this is essential reading….
There are three fundamental rises here to be aware of:
1. The National Living Wage
2. The Minimum Wage
3. The Real Living Wage
The National Living Wage paid to over-21s went up by 6.7%. The National Minimum Wage for 18 to 20-year-olds rose by 16%. Plus, a higher hourly rate called the Real Living Wage, paid voluntarily by some UK businesses to half a million people, has also gone up.
The minimum wage rates from 1 April 2025 are as follows:
But do employers really need to pay the increases?
In short, yes! It is a criminal offence if employers don't pay the correct National Minimum and Living Wages to their workers. Employers must be mindful that rates apply to staff even if they are not paid by the hour. Any employer not paying the correct amount can be fined by HMRC. The Real Living Wage is a different matter. Read on for more on that.
What is the Real Living Wage?
This is an unofficial hourly rate of pay which is overseen by the Living Wage Foundation charity and aimed at UK workers aged 18 and over. We should stress this is not a legal requirement. Employers who are signed up to the scheme however must have implemented the new rates by 1st May 2025.
National Insurance increases
Employers should be aware too that from April 6, 2025, employers' National Insurance contributions (NICs) will increase from 13.8% to 15%, and the threshold at which employers pay NICs will drop from £9,100 to £5,000, meaning employers will pay NICs on more of their employees' earnings.
Let’s look at the NIC changes in more detail
The rate of employer NICs (secondary Class 1 NICs) will rise from 13.8% to 15%.
· Employers pay NICs on earnings above the secondary threshold, which is £175 per week or £9,100 per year for the 2024/25 tax year.
· The standard rate for employer NICs is 13.8% on earnings above the secondary threshold for the 2024/25 tax year, which will increase to 15% in 2025/26.
· The secondary threshold, which is the point at which employers start paying NICs, is £9,100 per year for the 2024/25 tax year, and will reduce to £5,000 per year for the 2025/26 tax year.
· Employers also pay Class 1A and 1B National Insurance on expenses and benefits they give to their employees, at a rate of 13.8% from 6 April 2024 to 5 April 2025.
What is the impact on businesses due to NICs
Well, in short, businesses will pay more in employer NICs, and many lower-income and part-time workers will now be included in the NI system. To help smaller businesses, the Employment Allowance, which allows eligible employers to reduce their NIC liability, will increase from £5,000 to £10,500, and the £100,000 eligibility threshold will be removed. Businesses with an annual NI liability exceeding this amount are not eligible. Whilst sole directors with no employees cannot claim the allowance. The increased allowance will cover the employer NI contributions for up to three employees earning £30,000 annually. However, employers with larger teams will still face significant additional costs beyond the allowance.
Uncertain times – hang on to your key employees
This will certainly be a difficult time for business, but if they are smart, they will look to keep employees, manage them better and hopefully support with good wellbeing practices. Retention is key right now.
How can Amelore help?
As always, being on the front foot here is key. Employers will need to adapt swiftly to these changes in order to avoid accidental underpayments and any subsequent penalisation from HMRC. If you need advice, we’re here to help. Just get in touch with us here.