The UK government has confirmed that the National Minimum Wage (NMW) and National Living Wage (NLW) will rise significantly from 1 April 2025. These changes are expected to impact over three million workers, bringing higher wages but also increased costs for employers.
For businesses employing Skilled Worker visa holders, sponsorship licence holders, and companies considering a Sponsor Licence application, these wage increases may have compliance and financial implications.
In this article, we break down the new wage rates, how they compare to the current rates, and what UK employers need to do to prepare for the increase.
New National Minimum Wage and National Living Wage Rates (April 2025)
The National Living Wage applies to those aged 21 and over; the National Minimum Wage – to those of at least school leaving age. The rates change on 1 April every year. The hourly rate for the minimum wage depends on your age and whether the employee is an apprentice.
The new National Minimum Wage and National Living Wage rates, effective 1 April 2025, are:
| Age Group / Worker Type | Current Rate (April 2024) | New Rate (April 2025) | Increase (£ per hour) | Percentage Increase |
| National Living Wage (21 and over) | £11.44 | £12.21 | £0.77 | 6.7% |
| 18–20 y/o | £8.60 | £10.00 | £1.40 | 16.3% |
| 16-17 y/o | £6.40 | £7.55 | £1.15 | 18.0% |
| Apprentice | £6.40 | £7.55 | £1.15 | 18.0% |
These increases align with the government’s commitment to raising wages in line with inflation and economic growth.
How the Minimum Wage and National Living Wage Rises Affect Employers
The upcoming changes to the National Minimum Wage (NMW) and National Living Wage (NLW) present several challenges and considerations for employers:
Compliance and Legal Obligations
First and foremost, employers must ensure that all employees are compensated according to the new wage rates effective from April 2025. Failure to comply can result in legal penalties and damage to the company's reputation. The National Minimum Wage calculator is a useful tool that can assist employers in verifying compliance.
Increased Payroll Expenses
The rise in wage rates will directly elevate payroll costs for businesses. Employers must adjust their budgets to accommodate these higher wages, ensuring compliance with the new legal standards. This increase is expected to boost the earnings of over 3 million workers, enhancing their purchasing power and potentially stimulating economic growth.
Wage Compression
With significant increases in wages for lower-paid roles, employers may face wage compression, where the pay gap between junior and senior positions narrows. This could necessitate adjustments across various pay scales to maintain equitable and motivating wage differentials.
Employment Strategies
To manage the increased labor costs, some businesses might consider restructuring their workforce, implementing hiring freezes, or investing in automation to maintain profitability without compromising productivity.
Recommendations for Employers
- Budget Review: reassess financial plans to account for increased wage expenses.
- Pay Structure Evaluation: examine and adjust pay scales to prevent wage compression and maintain employee morale.
- Strategic Workforce Planning: consider workforce restructuring or technological investments to offset rising labor costs.
- Compliance Verification: regularly audit payroll systems to ensure adherence to the new wage regulations.
By proactively addressing these changes, employers can navigate the evolving wage landscape effectively, ensuring compliance and sustaining operational efficiency.