Employers will face higher costs from April as increases in the minimum wage and National Insurance Contributions (NICs) take effect.
Analysis by the Centre for Policy Studies (CPS) reveals that a full-time employee on minimum wage will cost businesses £2,583 more per year.
In 2024, businesses paid £1,617 in NICs for each minimum wage worker. This will jump by over £900 in 2025 – a 60% increase. Weekly NICs will rise from £31 to £50.
A full-time minimum-wage worker earned £20,821 in 2024, paying £1,650 in Income Tax. From April, their salary will increase by £1,401 to £22,222. However, Income Tax on this will rise by 17%, costing them £1,930. After tax, they will take home £20,292 – £1,121 more than in 2024.
Employee National Insurance will also rise, increasing from £659 to £771. After Income Tax and NICs, the worker’s net pay will be £19,521, up from £18,512.
The total cost of employing one minimum wage worker will hit £24,806 a year. This includes higher wage bills, NICs, and lowering the National Insurance threshold to £5,000, adding an additional £966 per employee.
The CPS warns these changes could negatively impact businesses, forcing them to reconsider investment plans and hiring.
We can help
Our financial management services can help you plan ahead and manage your cashflow more effectively. Please get in touch today to find out more.
