Employers Costs For Low-wage Workers Will Hit Record Levels In 2025

8th January 2025

Cost of employing low-wage workers to hit record high, says the Centre for Policy Studies.

A new report shows rising tax costs may lead employers to cut back on hiring, with commentators arguing changes could be particularly detrimental to small businesses and start-ups.

In April, rates of employer's National Insurance will rise sharply. This is one of the largest single tax increases in British history, and - given the likely impact on business and employment – one of the
most damaging.

Already, the economic impacts of the tax rise are being felt, as businesses slow their hiring and investment plans. But this is not just a bad tax because of its economic impacts, but because it is
regressive – disproportionately affecting those on lower incomes. Indeed, new analysis from the Centre for Policy Studies shows that thanks to the rise in employer NI, and the lowering of the threshold at which it is paid, the tax burden on minimum wage labour – ie, the cost of employing those at the bottom of the income scale – will be highest on record, at 21%

The organisation's report can be seen at - Punching Down - How Labour's job tax hits the lowest paid the most

Businesses employing a full-time minimum wage employee will face £2,583 in national insurance (NI) contributions in 2025, up from £1,617 in 2014.

Higher National Insurance costs added to the expected increases in the national minimum wage (NMW), take the total cost of employing a full-time worker on the minimum wage will have risen by £2,367 in 2025, compared to the previous year.

Centre for Policy Studies - https://cps.org.uk/