In the 2024 Autumn Budget, Chancellor Rachel Reeves introduced over £40 billion in tax hikes to address a £22 billion shortfall in public finances.
Among these, a key change for employers is the increase in National Insurance Contributions (NICs) – moving from 13.8 per cent to 15 per cent for applicable earnings – alongside a reduction in the NIC threshold, down from £9,100 to £5,000 per employee, effective from 6 April 2025.
While small businesses will receive some relief through a boosted Employment Allowance of £10,500, with the £100,000 earnings threshold removed, larger employers are facing escalating costs.
The growing challenge of rising employment costs
On top of increased NICs, the National Living Wage (NLW) will rise to £12.21 in April 2025 – a 6.7 per cent increase from the current rate.
This adjustment translates to an additional £1,400 per year for a full-time worker aged 21 or over, further adding to employer payroll expenses.
Industries with a high reliance on casual and part-time labour, such as hospitality, retail, and leisure, are likely to feel the strain more acutely.
For these sectors, the dual impact of higher NICs and wage increases may place considerable pressure on operating costs, prompting many to reconsider hiring strategies, shift patterns, and even pricing.
If your business is facing rising employment costs due to these Budget changes, our team is here to help you plan effectively.
For advice on managing your business expenses, reach out to us today.
