Businesses face monthly hike of £209 per employee

A new pay insight says the cost of each employee will rise by £209 per month from April 2025.

The Global Payroll Association (GPA) says the rises are based on upcoming changes to employer National Insurance contributions and the National Living Wage.

The government’s Autumn Statement announced that:

employer National Insurance Contributions (NICs) will increase from 13.8% to 15%

the threshold where employers pay NICs on each employee’s salary will fall from £9,100 to £5,000 a year, and

the National Living Wage (NLW) payable to those aged 21 and over will increase from £11.44 per hour to £12.21 per hour*.

What the changes mean for UK businesses

The figures are based on how much an employee over the age of 21 – who earns the National Living Wage and works 160 hours a month (40hrs per week) – will cost when the changes come in from April 2025.

Increases to the NLW mean that average employee’s wage will, when working 40 hours a week, increase from £1,830 per month to £1,954 – an additional cost of £123 per month for the employer.

The average employer pension contribution will rise from £39.31 per month to £43.01 – a £4 per month increase for the employer.

National Insurance changes mean the average monthly employer contribution will increase from £147.95 to £230.54 per employee – an increased cost of £83 for the employer.

Overall, this means the average employee earning the NLW and working 40 hours a week will cost their employer £2,227.15 per month from April 2025, making a total monthly increase of £209.

While this may not seem like a huge difference, it soon mounts up when accounting for all affected staff. To illustrate, research from Reuters* has shown that the changes are going to have a staggering impact on staffing costs for some of Britain’s biggest NLW employers.

Supermarket giant Sainsbury’s employs around 150,000 people, and predicts its staffing costs will increase by £140m per year.

Marks & Spencer is expecting a cost increase of £120m a year, as is Royal Mail owner, International Distribution Services.

ASDA and BT are both expecting their annual staffing bill to rise by £100m.

Melanie Pizzey, CEO and founder of the Global Payroll Association, says, “The government’s election pledge to avoid tax increases for working people has necessitated increased taxation for UK businesses.

“The additional minimum wage increases will have a particularly significant impact on those businesses who pay a large proportion of their workforce the National Living Wage.

“The upshot is that employees will be better off, but this benefit could come with a few caveats. With staffing costs on the rise, businesses will face additional financial strain and may, therefore, have to find ways of cutting costs elsewhere. This could mean that benefit packages are slashed, staff numbers reduced, and pay rises cancelled.

“While we hope any such measures are kept to an absolute minimum, they are, in some cases, inevitable. 

“It’s absolutely essential to ensure that cost-cutting measures do not result in essential employee-focused services, such as HR and payroll, being jeopardised or weakened. We encourage any businesses who have concerns in these areas to come and speak to us about the many ways that they can maximise the efficiency of payroll without risking its integrity or accuracy.”

Data tables and sources

* National Living Wage and employer National Insurance Contribution changes information sourced from Tax Assist.

* Expected impact of Autumn Budget on staffing costs for major British employers sourced from Reuters.

Full data tables & sources can be viewed online here.

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