Employment Costs Increase Alert!

The landscape in employment law is changing and while employers want to learn more about the full details of the changes and when they will be implemented, one of the more immediate challenges is the increase in costs.

From April 2025 onwards employers will need to budget for the following:

1.   an increase in National Minimum Wage;

2.   an increase in statutory payment rates; and

3.   an increase in National Insurance contributions (NICs) for employers.

For example:

• National Minimum Wage

The National Minimum Wage for the 21-year-old and over category will increase from £11.44 to £12.21.

This is an increase of 6.7%/£0.77. While this increase does not appear to be significant, over a year based on a 37.5-hour week it amounts to an increase in salary of £1,500.

• Statutory Payments

  
  

  All the statutory payments are due to increase. Statutory Sick Pay is up by 1.7%/£2.00 to £118.75 per week. Statutory family related payments such as maternity leave are up by 1.7%/£3.15 to £187.18 per week.

• NICs

  
  

  Secondary class 1 NICs are to increase by 1.2% to 15%. Employers will start paying NICs on employees’ earnings from £5,000, instead of the current threshold of £9,000.

Taking these increased financial responsibilities as a whole, there will be a real impact on profits, whatever the size of the business at what is already a time of economic uncertainty.

This may lead to employers putting recruitment plans on hold, restructuring people resources, downsizing training and development initiatives and freezing salaries; all of which will limit business growth and regrettably impact on staff moral.

When making changes involving people in response to these financial pressures and government requirements, employers need to remember that there may be employment law and contractual issues that need to be managed.

If your business’ response to the change is likely to necessitate a change to your working practices, contractual terms, roles, or headcount, it may be a good time to have a strategic legal review of your business to understand all the options available for responding to these challenges and to identify the most appropriate solutions, as well as any legal compliance issues.

Changing your business can be a difficult and stressful time, particularly as it can involve significant legal and financial risks if not managed properly, so businesses need to act now or plan ahead.

Looking for your business to be better prepared for the legal and financial changes ahead? Wanting greater future certainty?

FG Solicitors can assist your business with our business strategic review.

Contact FG Solicitors today on 0808 172 93 22 or complete our quick contact form for a no obligation discussion!

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This update is for general guidance only and advice should be taken in relation to a particular set of circumstances.