Are you ready for the National Minimum Wage increase in April 2025? In essence, the National Minimum Wage increase presents both challenges and potential opportunities for small businesses. Proactive planning and strategic adjustments will be essential for navigating these changes successfully.

National Minimum Wage increase in April 2025

Employer National Insurance

During the Budget, the Chancellor confirmed that Employer National Insurance will increase to 15%. On top of the changes to national living wage, this increase will need to be factored in to your financial planning & forecasting.

Some small businesses and charities may be eligible for the Employment Allowance, which allows them to reduce their employer NICs liability. Check HMRC guidelines for eligibility.

Preparing for the combined impact of National Minimum Wage (NMW) increases and changes to Employer National Insurance Contributions (NICs) requires a varied approach. Here’s a breakdown of essential steps for businesses:

• Review Payroll Costs – conduct a thorough review of your current payroll expenses. Calculate the projected increase in costs due to both the NMW rise and the NICs changes.
• Update Financial Forecasts – Adjust your financial forecasts to reflect the increased costs and assess the impact on your profit margins and cash flow.
• Pricing Strategy – Consider whether you need to adjust your pricing strategy to offset the increased costs. Analyse the potential impact of price increases on customer demand.
• Utilise the Employment Allowance – Ensure you understand the eligibility criteria for the Employment Allowance. Take full advantage of this allowance to reduce your NICs liability.

Payroll & HR

• Update Payroll Systems – Ensure your payroll software and systems are updated to reflect the new NMW rates and NICs thresholds. Double-check all calculations to avoid errors.
• Review Employment Contracts – Update employment contracts to reflect the new NMW rates. Ensure all employees are aware of the changes.
• Employee Communication – Communicate clearly with employees about the changes to their pay.Address any concerns or questions they may have.
• Workforce Planning – Evaluate your staffing needs and consider whether any adjustments are necessary. Explore options for improving efficiency and productivity.

Stay Informed & Compliant

Monitor Government Updates – Stay up-to-date on any changes to NMW rates and NICs regulations. Regularly check HMRC’s website for updates.

Seek Professional Advice – Consult with an accountant or payroll professional for guidance. Ensure you are complying with all relevant employment laws.

Record Keeping – Maintain accurate records of all payroll and NICs payments. 

The combined effect of NMW and NICs changes can significantly impact small businesses. With some proactive planning you can mitigate the financial impact. Staying informed and compliant is crucial to avoid penalties. Any concerns you have seek professional advice from your accountant or payroll specialist. 

By taking these steps, as a business owner, you can effectively prepare for the upcoming changes and minimise the impact. If you have any concerns about anything mentioned in our blog today please give us a call/email. We’re happy to help, based in Cornwall but we’re able to help businesses all over the UK.