Changes to the minimum wage: what this means for your payroll

Did you know the minimum wage increases from April 2025? Here’s how to mitigate the potential negative impact of this rise on your cashflow.

Did you know that the minimum wage is due to increase from April 2025?

Any increase in wages can have a significant impact on your payroll costs, cashflow and the profitability of your business. So, being aware of the minimum wage is a must.

What are the main changes to the minimum wage?

The Government has recently announced a rise in the minimum wage, to bring wages more in line with living standards and rising costs.

From 1 April 2025:

- The adult minimum wage will go up from $23.15 to $23.50 per hour.

- The starting-out and training minimum wage will go up from $18.52 to $18.80 per hour.

- All rates are before tax and lawful deductions, e.g. PAYE tax, student loan repayment, child support.

How can you minimise the impact of this rise to wage costs?

Paying out more in labour costs will ultimately have an impact on your bottom line.

And aside from the financial considerations, it’s important to make sure you’re ticking all the right compliance boxes too when it comes to paying your staff.

So, what can you do to reduce the potential negatives of this wage increase?

Review your pricing

Recalculate your prices to reflect the increased wage expenses. You need to stay competitive, while increasing your margins enough to cover the wage increase.

Analyse your labour costs

Think about your staffing levels and how many people you need to stay efficient. Look for areas you could streamline or automate to reduce the impact of increased wages on the bottom line.

Update your payroll budget forecasts

Revise your payroll budgets to incorporate the new wage costs and adjust other spending accordingly. This helps to balance out the additional labour costs and keep cashflow positive.

Communicate the change with your employees

Make sure you send out internal communications to your team with your response to the wage increase and any potential adjustments. Be transparent and make sure you update all payroll rates in your payroll software in time for April.

Talk to your business adviser

Professional advice helps you to explore different strategies for managing these increased wage costs. You can also look out for opportunities to claim tax benefits or government grants.