National Minimum Wage increases from 1st April 2025

As announced in the Autumn Statement 2024, the National Minimum Wage (NMW) is increasing with effect from 1^st April 2025 and as an employer, it is essential to ensure full compliance with the new rates.

National Minimum Wage – effective from 1^st April 2025:

Age threshold	Current NMW Rate per hour	NMW Rate per hour from April 2025	Increase in £ per hour	% increase	New minimum annual salary based on 40 hours per week
21 years and over  (National Living Wage)	£11.44	£12.21	£0.77	6.7%	£25,397
18 – 20 years	£8.60	£10.00	£1.40	16.3%	£20,800
Under 18	£6.40	£7.55	£1.15	18.0%	£15,704
Apprentice	£6.40	£7.55	£1.15	18.0%	£15,704

 

If you use a payroll bureau (such as RPG Payroll Services), your payroll service provider will ensure all employees are paid at least the National Minimum Wage. They will also keep you informed of any additional actions required to remain compliant.

For those who manage payroll in-house, it is important to check whether your payroll software automatically updates wage rates. Some cloud-based payroll providers may implement these changes in the background, but this is not always guaranteed. You may need to make manual adjustments to ensure all employees are paid correctly under the new guidelines.

We recommend reviewing your payroll setup as soon as possible to avoid any non-compliance issues. Please see below for our suggested actions:

1. Review Employee Categories and Salary Bands:

• Check the fixed salaries and hourly wages for all employees to ensure compliance with the new NMW rates.
• Note that the apprentice wage category applies only during the first year for apprentices aged 19 and over—after this, the age-relevant minimum wage must be applied.
• Consider how these changes may affect percentage-based bonuses and pension contributions (though pension software should account for this).

2. Communicate Salary Changes to Employees:

• We recommend sending a formal letter to affected employees confirming their updated salary.
• Ensure that employment records are updated accordingly.

3. Review Job Vacancies:

• Check all current job offers and advertised positions to confirm they align with the new NMW rates. Pay particular attention to annualised salaries.

4. Assess the Impact on Other Employees:

• Consider whether salary adjustments are necessary for other roles as the new NMW rates may cause pay compression between junior and senior employees.

Employers’ National Insurance Contributions (NICs)

In addition to the NMW changes, we also want to bring to your attention several important changes to Employers’ National Insurance Contributions (NICs) that will take effect from 1^st April 2025. These changes may impact employment costs for many businesses.

Key Changes to Employer NICs:

• Reduction in the NICs Secondary Threshold –
  The secondary threshold, the point at which employers start paying NICs, will decrease from £9,100 to £5,000 per year.
• Increase in Employer NIC Rate –
  The employer NIC rate (secondary Class 1) will increase from 13.8% to 15%.
• Increase in Employment Allowance –
  • The Employment Allowance, which can be deducted from the employer’s NIC bill, will increase from £5,000 to £10,500.
  • The restriction on the Employment Allowance, where only employers with a secondary NIC liability below £100,000 in the previous year could claim it, will be removed.
  • All other eligibility requirements remain unchanged.

Action Required:

Employer NIC payments are processed through payroll systems, so we strongly recommend:

• Checking your payroll software to ensure these changes are correctly implemented.
• Reviewing your employment costs and budgets to account for the increased NIC rates.
• Ensuring you are making full use of the updated Employment Allowance if eligible.

Wider implications:

As HMRC continues to increase its focus on payroll and National Insurance Contribution (NIC) compliance, it is crucial for businesses to stay ahead of potential risks. In February 2024, over 500 businesses were publicly named for failing to meet minimum wage requirements. Those named had to repay what they owed to their staff (which could have been up 6 years) and faced significant financial penalties of up to 200% of the underpayment and reputational damage.

Whilst ensuring employees are paid at least the National Minimum Wage (NMW) is essential, HMRC may also scrutinise other areas, including:

• Insufficient or lack of time keeping records.
• Payroll records for all employees.
• Deductions for the cost of uniforms or specific dress code.
• Subsidised car parking.
• Deductions for accommodation.
• Salary sacrifice.

It is also worth considering that suppliers and trade organisations may request proof of NMW compliance as part of their due diligence processes.

RPG Payroll Services 

Managing payroll compliance in an evolving regulatory environment can be challenging, but RPG Payroll Services offers a fully managed payroll solution, powered by leading cloud-based technology. Our team ensures accuracy, compliance and peace of mind for your business.

Additionally, if you are concerned about potential HMRC reviews, we offer the RPG Tax Investigation Service in partnership with Croner-i, covering professional fees in the event of an HMRC payroll compliance check.

For more information or to discuss how we can support your business, please contact your usual RPG adviser or reach out to us directly to our offices in Manchester and St Asaph. You can email info@rpg.co.uk or call 0161 608 0000.

Last date reviewed: February 2025.