Employers have been heavily impacted by this Budget. Employers’ National Insurance Contributions (NICs) will increase by 1.2% to 15% from April 2025. And the threshold at which it becomes payable has decreased from £9,100 to £5,000.
That double whammy of tax rises is partly offset by the Employment Allowance increasing from £5,000 to £10,500 to help smaller employers. 
The NIC rise is a jobs tax which will impact on future wage rises for employees, as well as recruitment plans.
Employers also face the National Living Wage (NLW) rise from 1 April 2025 to £12.21 to reflect the cost of living under Labour’s Plan to Make Work Pay. The rise is three times the current rate of inflation (1.7%) as employers face extra costs under the Budget.
The 6.7% increase in the minimum wage is much higher than the rate of inflation due to the government changing the rules so that wages reflect the cost of living.
The National Minimum Wage (NMW) for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour – the largest increase in the rate on record.
The government says this is the first step towards aligning the National Minimum Wage and National Living Wage to create a single adult wage rate. No date is given for when this will happen
With the increase in Employer NICs to 15%. this will increase the cost of an employee on national living wage (working 35 hours per week) to just under £2,270 per employee from April 2025.
My advice to businesses would be to start reviewing their business model to see how they can accommodate higher wages and employment costs. This should include reviewing their financial forecasts and budgets to see if they can streamline their operations to reduce costs.
Business owners should also consider if they can optimise workforce efficiency through training and performance management. Onboarding procedures should be also reviewed to ensure that businesses are bringing in the right staff.
