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NMW Rates Increase for 2025: What Employers Need to Know
4 Minute Read
4 Minute Read

It is time to start planning for 2025 following the ‘Halloween’ Budget, we have the notifications for the 2025 National Minimum Wage increases.

The new rates which will apply from 1 April 2025 are as follows:

  • NLW (21+) £12.21
  • 18-20 year olds: £10
  • 16-17 year olds: £7.55
  • Apprentice: £7.55

The increases (a whopping 18% for apprentices and 16–17-year-olds) see the move towards the removal of the age bands as promised by the Labour government. What this means is that employers will need to be planning for the day when there is a ‘flat rate’ minimum wage, and with an increase on the cards each year, budgeting will need to account for at least £12.21+ for every worker.

Implications for Employers: Rising Costs and Budget Challenges

Great news for employees and workers, however for certain industries where there is a reliance on entry level and low skilled labour this is going to represent a squeeze, particularly with the increase in employers National Insurance and the reduction in the threshold for payment of employer’s contributions to £5,000 (rather than £9,100).

Put plainly, it is going to get more expensive to employ people, and not just for those with a workforce predominantly at the minimum wage, (though those employers are going to see the biggest hit on the bottom line, the hospitality sector in particular are likely to see their operations become much more expensive).

A Practical Example: Hospitality Industry Impact

By way of example: A hospitality business employees 20 employees, each employee works 40 hours a week at NMW.

  • The wage bill per employee is £23,795.20 per year and the NI employer bill for each is £2,027.94.
  • With the changes, the new per employee wage is £25,396 and the NI bill: £3,059.40.
  • The increase per employee per year is £2,632.26.
  • Across the whole business that is £52,645.20 that the employer needs to find. 50 grand.

In a time when energy prices and the cost of produce remains high. In February 2024, Euronews reported that a quarter of businesses in hospitality say they were in danger of running out of money with no cash reserves. A further 29% said they had less than 3 months money put by.

In February there was a plea for the government to cut VAT, NI contributions, business rates and VAT. Instead, business rates relief has been discounted (meaning higher bills next year) VAT has been preserved and NI has gone up.

It’s easy to be distracted by the ‘penny off a pint’ news for draught beer, however all other taxes on alcohol will rise in line with RPI. The cut is unlikely to be enough to stop the hospitality industry creaking under the pressure.

Facing Budget Challenges? We’re Here to Help

Are you in hospitality, or in an industry facing challenges following the budget? Contact us today so we can support you with increased costs to your business and practical and legally compliant steps if you need to start considering steps to insulate or restructure as a result.

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