Tax and pay hikes to see firms pay £2,300 more per low-wage worker this year
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UK businesses employing staff on minimum wage will see costs jump by more than £2,000 per worker this year – with the tax burden hitting the highest on record, new analysis has shown. An increase to the rate of employer national insurance and a lowering of the threshold at which it is paid will make it more expensive to employ the lowest paid, according to think tank the Centre for Policy Studies.
The analysis comes after some of the country’s biggest retailers said job losses were unavoidable as a result of tax increases. It showed that it will cost an average of £24,806 to employ someone over 21 earning the minimum wage, which amounts to £2,367 more per person than in 2024.
That will partly be driven by the hourly national minimum wage rising from £11.44 to £12.21 from April. But it will also come from the rate of employer national insurance increasing from 13.8% to 15% next year, with payments starting when an employee earns £5,000, down from the current £9,100.
Chancellor Rachel Reeves was met with some backlash from businesses up and down the country after announcing the policy measure in her autumn Budget in October. Some of Britain’s biggest retailers – including Tesco, Sainsbury’s, Boots and Next – signed an open letter to Ms Reeves warning that they will have to raise prices and cut jobs as a result of the higher tax burden.
