As is the case each year, the National Living Wage in the UK rose in April. The new wage, which reflects the cost of living, came into effect on April 1st, 2025. While the minimum wage typically increases annually, this year’s rise was slightly different. Employers needed to track changes to pay, employer National Insurance contributions and Employment Allowance.
Make Work Pay
Before the Labour government came into power, the Make Work Pay plan was a key part of their manifesto. The mission was to secure workers’ jobs, put more money in working people’s pockets and strengthen union rights. Achieving something on this scale isn’t done overnight; instead, we’ve seen a steady implementation of legislation to drive progress.
Minimum Wage
The 2025 National Living Wage increase was 6.7%, a notable step towards Labour’s Make Work Pay pledge. For a full-time minimum wage worker, this amounted to an annual increase of approximately £1,400. The pay boost benefitted over 3 million workers in the UK, including apprentices.
New Minimum Wage rates
|
Employee Band |
National Minimum Wage rate |
Increase (£) |
Increase (%) |
|
Apprentice |
£7.55 |
£1.15 |
18% |
|
16-17 years |
£7.55 |
£1.15 |
18% |
|
18-20 years |
£10.00 |
£1.40 |
16.13% |
|
National Living Wage (21+) |
£12.21 |
£0.77 |
6.7% |
- The lowest paid 21-year-old working 37.5 hours per week began earning £23,809.50 annually from April.
- Employers’ NI rose from 13.8% to 15%
- Employer pension contributions amounted to £714.29 per worker.
The total investment in employing a minimum wage worker rose to £28,095.22 per year.
Why this mattered for businesses
- Legal Compliance: The minimum wage is a legal requirement. Paying less can result in serious legal and reputational risks.
- Financial Planning: Misalignment between payroll changes and financial forecasts can create budgeting issues. Backpay adjustments can be costly and complex.
- Employee Retention: Research has shown that underpaid employees are less productive and more likely to leave. Ethical pay practices promote loyalty and morale.
- Reputation: Following minimum wage legislation proactively can improve your company’s image and attractiveness to both clients and talent.
Why this mattered for employees
- Living Standards: The increase aimed to help workers better meet rising living costs and household expenses.
- Career Growth: Improved financial stability encourages further training and professional development—benefitting both employees and their organisations.
Additional changes
From April 6, 2025, Employers’ National Insurance rose to 15% on income over £5,000 (previously £9,100). This increased tax obligations for many businesses.
The Employment Allowance also increased from £5,000 to £10,500, providing qualifying employers some relief on National Insurance liability. This change aimed to help both small and large businesses invest further in staff retention and growth.
Navigating payroll changes
Minimum wage compliance is critical and navigating pay rises can be sensitive. By outsourcing HR services, businesses can ensure fair, compliant implementation while maintaining employee trust. Our expert team can support these discussions professionally, helping employers avoid missteps.