On April 6, 2025, employer National Insurance Contributions (NICs) will increase from 13.8% to 15%. As a result, we are expecting to see an increase in redundancies – just as we did during the pandemic. The level at which employers start paying this will also drop from £9100 to £5000 per year, which means that employers, according to the Centre for Policy Studies, will see an increase of NICs for a minimum wage employee from £1687 to £2513 per year.
Together with rises in National Minimum and Living Wage rates, inflation, as well as potential looming costs with changes brought by the Employment Rights Bill (such as increased cases of unfair dismissal and subsequent pay out of compensation), 2025 may well be the most expensive year yet for employers of minimum wage workers. According to the Office of Budget Responsibility, this could increase their payroll bill by 2% and particularly impact smaller businesses.
The logical way that such companies may save costs would be to shave their workforce, especially if they are not able to enjoy the government’s Employment Allowance which helps reduce NI liability for some, but not all, employers. In addition, such raised costs will inevitably be passed onto the workers, through lower real wages, and to consumers, through increased prices.
Employers may also be looking at reducing costs by hiring more self-employed staff, outsourcing services such as HR, payroll and marketing or having more employees work from home, to reduce or even lose office space.
Will we see increased redundancies or have these started already?
According to the Chartered Institute of Personnel and Development, a survey of 2000 UK companies showed an increased intention to make redundancies, with actual redundancies rising to the highest level in 10 years apart from during the pandemic. The survey found the motivation behind these layoffs was directly linked to costs. One in three intended to use redundancies to reduce costs and one in four to do so in the three months from January to March 2025. This was combined with not only recruitment freezes but general plans to halt business investment.
This cannot have been the Labour party’s intention with its emphasis on economic growth. The situation can only have been made worse with the announcement this week of US tariffs of 10% on UK goods and suggests that the immediate economic future looks bleak.