The new National Minimum Wage (NMW) rates that will come into effect from 1st April 2025 were announced as part of the recent Budget. It’s crucial that business owners stay informed about these changes and understand how they might impact their operations for the future.

Let’s delve into the details and explore the steps you can take to prepare for these changes.

The new rates:

The following table outlines the new NMW rates for the period 1st April 2025 to 31st March 2026, compared to the current rates:

Age Group	1st April 2025 – 31st March 2026	1st April 2024 – 31st March 2025	Increase
National Living Wage (21 and over)	£12.21	£11.44	6.7%
18 – 20 year old rate	£10.00	£8.60	16.3%
16-17 year old rate	£7.55	£6.40	18%
Apprentice rate	£7.55	£6.40	18%

Understanding the changes

The National Living Wage, applicable to those aged 21 and over, will increase by 6.7%. While this might seem modest compared to recent years, it’s still a significant rise that business owners need to factor into their financial planning.

Perhaps more significant are the substantial increases for younger workers and apprentices.

The 18-20 year old rate will jump by 16.3%, while the 16-17 year old and apprentice rates will both see an 18% increase. These larger percentage increases reflect the government’s aim to gradually remove age bands and move towards a unified minimum wage for all adults.

The context behind the changes…

The Low Pay Commission (LPC), an independent body that advises the government on minimum wage rates, recommended these increases. The LPC’s remit includes considering factors such as the cost of living and expected inflation trends up to March 2026.

Baroness Philippa Stroud, Chair of the LPC, acknowledged the challenges these increases might pose for businesses, stating, ‘The data shows some signs of employers finding it harder to adapt to minimum wage increases.’ However, she also noted that the economy is expected to grow over the next year, albeit with subdued productivity growth.

Practical Steps to take…

We’d recommend you start preparing for these changes sooner rather than later. Here are some suggestions:

1. Review your payroll: Ensure your payroll systems are updated to reflect the new rates from 1st April 2025.

2. Assess your workforce: Identify which employees will be affected by the changes and calculate the potential impact on your wage bill.

3. Budget planning: Factor these increases into your financial projections for the 2025/26 financial year. If you don’t have any, set some time aside to create them, or get in touch!

4. Review contracts: Check employment contracts, particularly for younger workers and apprentices, to ensure they comply with the new rates. Speak to your HR advisor if you need to, but don’t leave this one too late as they’ll need time to review your documentation.

5. Consider wider implications: These wage increases might affect other aspects of your business, such as pricing or staffing levels. Start thinking about potential adjustments now so you can look at the various implications..

6. Stay informed: Keep up to date with any further announcements or guidance around these changes and speak to your HR advisor if you have any concerns.

While these increases are undoubtedly good news for workers, they may present a challenge for many businesses, particularly those that are smaller, or who work in lower paid or less skilled industries. By starting to plan now, you can ensure your business is in a good place to implement these changes before April 2025.

Remember, compliance with NMW regulations is crucial. Failure to pay the correct rates can result in penalties and reputational damage. If you’re unsure about any aspect of these changes, speak to us, your payroll supplier or your HR advisor.