5 ways to prepare for April’s National Minimum Wage increase

By alisonbarlow|Feb 13, 2025|11:36 am GMT

April 2025 will usher in a raft of changes that will dramatically increase the cost of labour. While employer national insurance contributions (NIC) may have dominated the headlines, a sizeable hike in the National Minimum Wage (NMW) is also on the cards. The Government is pushing for wage parity between age groups, with those under 18 and apprentices due the biggest pay bump (+18%). Workers aged 18-20 will see their NMW increase by 16.3%, while those over 21 are due a 6.7% increase.

These changes add considerable cost pressures for hospitality operators already grappling with tight profit margins. Here, we share five practical ways to prepare for and manage the impact of upcoming NMW increases.

1. Review business operations and staffing structures

An audit of employees’ hourly rates is the first step in preparing for NMW increases and will be essential in identifying which employees are likely to be affected. While you legally only need to increase pay for those below the new NMW threshold, consider pay reviews for senior staff as well so you maintain a meaningful distinction between junior staff and those with additional responsibilities.

Think carefully about how your team is structured and whether there are changes you can make within the business to create efficiencies in labour deployment. Would cutting the number of cocktails on your drinks menu allow you to reduce the amount of bar staff on shift? Could staggering shift start and end times help to reduce the number of staff underutilised during quieter periods?

2. Avoid accidental non-compliance

Non-compliance with NMW regulations, even accidentally, can be costly. Penalties range from £100 to £20,000 per affected worker. In 2024, over 500 businesses were fined for not paying their staff NMW –– many of them household names. There are a couple of common areas where employers can lapse into accidental non-compliance:

• Uniform expenses and any deductions for uniforms or workwear should not take employees’ earnings below the NMW. The easiest solution for employers to avoid this is to supply uniforms directly at no charge.
• Watch out that salary sacrifice arrangements, such as childcare vouchers, don’t take effective pay below NMW either –– even if the value of the benefit exceeds NMW. Calculate these carefully or avoid providing these benefits to people on NMW.

3. Leverage automation

Technology can be a helpful tool for removing administrative burdens from payroll teams, automating updates and helping them avoid accidental non-compliance with legislation changes.

Fourth’s HR and Payroll platform is designed to take the heavy lifting off administrative teams, enabling them to focus on high-value activities, such as supporting staff or driving business growth. It includes features such as:

• Batch updates to adjust multiple employee records simultaneously, ensuring quick compliance with new wage rates.
• Automation rules allow businesses to establish rules, such as employee age or length of service, that automatically trigger an update when an individual passes a defined threshold.
• Bulk updates prevent teams from manually updating individual records when new legislation comes in; instead, they can update records for all affected staff in one go.
• Manage multiple employments for staff working across different roles; this simplifies pay adjustments to ensure accurate, consistent pay.

4. Review policies and contracts

Carefully evaluate pay structures, contracts, and overtime policies to ensure compliance with NMW requirements. Reliable time and attendance systems can help track hours worked, ensuring employees are paid correctly and that unpaid overtime doesn’t push their wages below NMW.

5. Communicate changes clearly

Don’t assume that all affected staff will be aware of incoming changes; take the time to update everyone and provide enough notice for individuals to ask questions. Update wage rates and hourly pay in your policies and internal documents, and make sure everyone knows how to access them and view changes.

If you are trying to manage down costs, consider running an employee consultation to see whether staff would be open to options such as increased pension contributions or salary sacrifice schemes. These can reduce employer NIC and tax liabilities and may help offset the costs of increased NMW.

Preparing for April 2025

Operators are now pretty well practised at managing NMW increases, but with employer NIC also set to rise in April, this year will likely be incredibly challenging. Proactively preparing for the update –– seeking solutions to help streamline payroll, finding efficiencies in labour deployment, and understanding your compliance obligations –– is critical for those seeking to weather yet another round of cost increases.