Thorn Baker Group: Implications of the

Important Update: Implications of the National Living Wage and Employer National Insurance Changes for Your Business

As part of our commitment to keeping you informed and equipped to navigate changes that may impact business, we want to discuss the recent UK Government announcements regarding the National Living Wage (NLW) increase and Employer National Insurance (NI) changes for 2025.

At Thorn Baker, we understand that workforce costs are a significant factor for businesses, and we're here to help you adapt seamlessly to these new regulations.

Key Changes from April 1, 2025

National Living Wage Increase

From April 1, 2025, the National Living Wage will rise to £12.21 per hour for workers aged 21 and over. This represents a 6.7% increase from the previous rate of £11.44 per hour.

Employer National Insurance Changes

From April 2025, the following adjustments to Employer NI will take place:

The Employer NI rate will increase by 1.2%, rising from 13.8% to 15%.
The earnings threshold for Employer NI will be lowered from £9,100 to £5,000.

These changes mean that businesses will face increased costs associated with employing staff, making it crucial to review financial strategies now.

What This Means for Your Business

These combined changes will have broad implications, requiring proactive planning to ensure financial stability and compliance. Key considerations include:

1. Increased Labour and Employment Costs - The rise in NLW, coupled with the Employer NI adjustments, will significantly impact payroll expenses. Businesses must account for these higher costs to maintain profitability while continuing to support their workforce.

2. Budget Review and Forecasting - Now is the time to reassess budgets and financial projections. Identifying opportunities for efficiency improvements or automation could help offset these additional costs.

3. Impact on Hiring Decisions - The increase in Employer NI costs may affect hiring strategies. Businesses might need to explore alternative workforce structures, such as outsourcing, temporary staffing solutions, or flexible contracts, to manage expenses effectively. Additionally, selecting a high-quality temporary workforce will be more critical than ever. With labour costs typically rising by 10%, ensuring you get the best talent for your investment is essential to maintaining productivity and project quality.

4. Employee Morale and Retention - Higher wages can boost employee satisfaction and retention. Leverage this opportunity to reinforce your commitment to your team’s well-being and financial security.

5. Pricing Adjustments - Given the rise in employment costs, businesses may need to review pricing strategies to protect profit margins without compromising service quality.

6. Compliance and Legal Obligations - Ensuring compliance with both the new wage regulations and Employer NI changes is critical to avoiding financial penalties and reputational risks. Businesses should conduct payroll audits and update their payroll systems accordingly.

The Impact on all Businesses & Supply Chains

It’s important to recognise that these cost increases affect every business across all industries. If you find that prices have increased throughout your supply chain, be mindful that your suppliers and service providers are also dealing with the same financial pressures.

As businesses adjust to rising wage and employment costs, many may need to increase their fees to remain sustainable. While these changes may impact your bottom line, we encourage a collaborative and respectful approach when reviewing pricing from suppliers. Open discussions and long-term partnerships will be key to navigating these changes together and maintaining strong business relationships.

How Thorn Baker Can Help You

As your trusted recruitment partner, the teams at Thorn Baker are here to support you through these changes with the following:

Financial Planning - We can help you develop strategies to manage increased labour costs effectively - and to ensure you're getting the best talent for your investment.
Workforce Optimisation - Reviewing your workforce structure to identify cost-saving opportunities and efficiency improvements.
Compliance Support – Ensuring your business remains fully compliant with the new wage and NI regulations, reducing risks and administrative burdens.
Talent Retention Strategies – Helping you create competitive compensation packages to attract and retain top talent in light of the NLW and NI changes.

Next Steps

Proactive planning is key to successfully navigating these changes. Reach out to your local branch or dedicated consultant to discuss how these wage and tax changes will impact your business and develop a tailored action plan.

Our priority is to make this transition as smooth and cost-effective as possible, ensuring your business thrives under the new employment framework.

Paul Jackman, CEO of Thorn Baker, shares his thoughts on what this means for businesses:

“As we approach these legislative changes, it’s clear that businesses of all sizes will feel the impact - whether through direct payroll increases, higher employment taxes, or supply chain cost adjustments. The key to success is preparation. By assessing workforce structures, forecasting financial implications, and implementing proactive strategies, businesses can navigate these shifts with confidence. At Thorn Baker, we're committed to helping our clients stay ahead, ensuring they have the right workforce solutions to remain compliant and competitive.”

Get in touch today: www.thornbaker.co.uk/contact-us