As April 2025 approaches, millions of UK workers are set to see significant changes to their pay, along with new regulations in employment law.
Among the most notable reforms are a substantial rise in the National Living Wage and National Minimum Wage, alongside an increase in National Insurance contributions for employers.
These changes, announced by Chancellor Rachel Reeves, aim to improve the financial security of working individuals and stimulate the economy. However, they also come with challenges for businesses and employers navigating these increased costs.
Wage Increases for Millions of Workers
A core part of the government’s planned reforms is the rise in the National Living Wage and the National Minimum Wage. From April 2025, the National Living Wage for workers aged 23 and over will rise from £11.44 to £12.21 an hour, marking a 6.7% increase.
This adjustment will result in a £1,400 annual boost for a full-time worker. Meanwhile, the National Minimum Wage for 18 to 20-year-olds will see a record-breaking increase from £8.60 to £10.00 per hour.
This wage boost is expected to affect more than 3 million workers across the UK, directly benefiting low-income households. The government’s move to further standardise wage rates by eliminating age brackets will also pave the way for a unified pay structure in future years.
Chancellor Reeves described the changes as a “significant step” toward achieving a genuine living wage for all.
In addition to these wage rises, there will be increases in statutory pay for parental leave and sick pay, with the weekly rate of statutory maternity, paternity, and sick pay rising to £187.18 from £184.03. These reforms will provide further support to families and workers during challenging times, including periods of illness or the birth of a child.
National Insurance Hike for Employers
Employers, however, will also face higher costs from April 2025, as National Insurance contributions for employers rise by 1.2 percentage points, bringing the rate to 15%. This increase will be felt particularly by businesses with lower-paid workers, who will see a higher portion of their earnings taxed.
Additionally, the threshold for employers to begin paying National Insurance will be lowered from £9,100 to £5,000, bringing more workers under the scope of employer contributions.
To offset some of the burden on small businesses, the government has also introduced an increase in the Employment Allowance from £5,000 to £10,500.
This initiative is designed to ensure that smaller employers—about 865,000 of them—will pay no National Insurance at all, while over a million businesses will see no increase in their contributions.
