First published on Friday, November 22, 2024
Last updated on Friday, November 22, 2024
With the government announcing higher statutory pay rates for 2025, business owners are facing a double-edged sword.
On the one hand, these changes are designed to help employees keep pace with the rising cost of living. On the other, they mean additional costs for employers, not just in wages but also in statutory payments like Sick Pay and Maternity Pay.
Here’s everything you need to know about the changes and how they could impact your business.
The new pay rates for 2025
From April 2025, these are the new statutory pay rates per hour:
Increasing from £11.44 to £12.21 for National Living Wage (21+)
Rising from £8.60 to £10.00 for National Minimum Wage (18–20-year-olds)
Moving from £6.40 to £7.55 for those aged 16 to 17 and apprentices
But that’s not all. Benefit and pension rates are also increasing. You can find the full list of benefits and pension rates for 2025 on the government website.
Let’s look at some of the increases to statutory benefits.
Increases to Statutory Sick Pay (SSP)
Statutory Sick Pay (SSP), the amount you must pay eligible employees when they’re off work due to illness, will rise from £116.75 per week to £118.75 per week in April 2025.
It’s also important to note that under the proposed Employment Rights Bill, sick pay could be payable to employees from the first day they are sick, opposed to only being payable after four days of sick leave, currently.
This increase could affect businesses in a few ways:
If you have a high rate of absenteeism, your costs for covering sick leave will grow.
Tracking and managing SSP payments may require updates to your payroll systems.
To manage this, consider reviewing your sickness policies and encouraging a healthy working environment to minimise absenteeism.
Changes to Statutory Maternity Pay (SMP)
Statutory Maternity Pay (SMP), which is paid for up to 39 weeks to eligible employees, will also see a boost. The weekly rate is set to increase from £184.03 to £187.18.
Other family-related statutory pay will rise in line with this figure including:
Parental Bereavement Pay
For employers, this means:
Higher budget allocations
Cash flow implications
How will these increases impact business owners?
Higher minimum wages and increased statutory payments mean your overall employment costs are going up.
For business owners, particularly in hospitality, retail, and care, where many employees are on lower wages, these increases will add pressure. If you’re already feeling the squeeze from rising costs, this could make things tighter.
Small and medium-sized enterprises (SMEs) often have less financial wiggle room to absorb changes like this. For some, it might mean tough choices about pricing, staffing levels, or even cutting back on other expenses.
Whether it’s covering SSP for unplanned absences or budgeting for SMP for employees on parental leave, these changes will require careful financial management.
The silver lining? Higher pay often means happier employees, and happier employees tend to stick around. If you’ve been struggling with staff turnover or recruitment, these increases might make your roles more appealing and improve morale.
How can business owners prepare?
Start crunching the numbers now. Look at your current wages and statutory payments and forecast how the changes will affect your budget. Planning ahead will help you avoid surprises and identify any potential gaps or challenges early.
You should also focus on efficiency. Are there areas where you can tighten up? Maybe it’s investing in time-saving payroll technology, streamlining processes, or upskilling your team so they can do more with less.
You could also introduce or enhance a absence management system to monitor absenteeism. A clear sickness policy and proactive health initiatives could reduce sick leave and help you manage SSP costs.
Remember to be upfront with your employees about what these changes mean for the business. Transparency builds trust, and your team will appreciate being kept in the loop.
Did you know? Most small businesses can reclaim a significant portion (between 92% and 103%) of SMP and other family-related statutory payments. Just make sure you’re set up to do this efficiently to ease cash flow pressures. The government website lays out how you can reclaim these payments.
Need help with statutory pay rate increases?
While these increases might feel like a challenge, they’re also an opportunity. A higher wage could attract better talent, reduce turnover, and ultimately improve productivity. And remember, many of your competitors will be facing the same hurdles.
The key is to stay proactive. With some planning, creative thinking and help from BrightHR you can navigate these changes and come out stronger on the other side.
If you’re unsure about how these changes will affect your business, you can use our 24/7 HR and employment law advice line. They can help you stay compliant while managing costs.
