The Government has now laid legislation confirming that the National Living Wage and National Minimum Wage will both increase from 1 April 2025.
Although the increase was announced at the last Budget, the legislation affirms the increase and the consequent impact on businesses, specifically small and medium-sized enterprises (SMEs).
Detail of the changes from 1 April
- The National Living Wage for those aged 21 and over will rise from £11.44 per hour to £12.21 per hour;
- The National Minimum Wage for 18- to 20-year-olds rises from £8.60 to £10.00 per hour; and
- The apprenticeship rate, and for 16- to 17-year-olds rises from £6.40 per hour to £7.55 per hour.
The Department for Business and Trade states that over 3 million workers in shops, restaurants and workplaces are set to receive the pay rise. The National Living Wage increase is worth £1,400 a year for an eligible full-time worker, while The National Minimum Wage rise will see full-time younger workers’ pay boosted by £2,500 a year.
An impact assessment reveals that these reforms will put around £1.8 billion into the pockets of workers over the next six years – delivering on the Government’s Plan for Change to improve living standards and make working people better off.
Impact on businesses
Increased wages present opportunities and challenges for businesses – they offer a morale boost, aid employee retention, and can even drive operational efficiencies, yet this is a change that will undoubtedly impact the bottom line for many SMEs.
This is a pay boost that is likely to necessitate change for many businesses in order to protect profits and not compromise on growth.
Businesses may look to adapt, particularly in light of other economic pressures, perhaps adjusting their pricing; reassessing their employee model and the use of part-time and freelance workers; and investing in employee productivity.
Next steps
It is important that you understand the impact of the above changes in rates for your business’s wage bill and the adjustments to employer national insurance rates/thresholds that will also affect your business from 6 April.
