National Living Wage (NLW) and National Minimum Wage (NMW) Increase: Why You Need to Act Now

Fair pay is essential, but these changes are likely to have an impact on your business’s financial health.  Now is the best time to act by conducting a thorough payroll cost analysis, and revisiting your cash flow forecasting to ensure your business is prepared.

The rise in the minimum wage rates not only increases base salaries, but also triggers a ripple effect on associated costs for the business.  Employers’ National Insurance Contributions will rise, and with higher wages, your pension obligations under auto-enrolment schemes will also grow.  Failing to plan for these cost increases could lead to cash flow issues, difficulty meeting other financial obligations, or even penalties for non-compliance.

The new rates effective from the first pay period on or after the 1st April 2025 will be:

                                          April 2024        April 2025
21 years old and over          £11.44              £12.21
18 to 20 years old               £8.60               £10.00
Under 18 years old              £6.40               £7.55
Apprentice                          £6.40              £7.55

Click here for HMRC guidance on the new pay rates
 

Why it’s Important to Take Action Now

• Accurate Payroll Budgeting:  This enables you to understand the financial implications of the new rates, and ensure your payroll budget aligns with the increased costs.  This analysis will help identify where savings or efficiencies might be found, and at the very least prepare you for what’s to come.
• Cash Flow Resilience:  Adjust your cash flow forecasts now to avoid surprises in 2025.  Consider seasonal differences, payment cycles, and how increased payroll costs could put additional strain on the business.
• Avoiding Non-Compliance:  Late adjustments and incorrect information given to payroll could result in failure to pay the new minimum rates, leading to legal penalties and reputational damage.
• Future-Proofing Your Workforce Costs:  Wage increases often lead to demands for pay parity across any higher earners that you may have. Building these possibilities into your financial models now, will protect your long-term sustainability, and keep you competitive in the employment market.

Proactive planning in business is essential.  Reach out to us for help reviewing your payroll forecasts.  Taking action now will ensure your business thrives in 2025 and beyond.

Hayley