While the minimum wage increase might be a positive boost for your team members, it can be a worry for you as a business owner in the UK, even if you care greatly about your employees’ living wage and their quality of life. If you’re nervous about how the minimum wage increase will affect your business in both the long and short term, read on for some practical truths and information that can allow you to look toward the future without trepidation.
What’s the minimum wage increase?
The government increases the minimum wage regularly to keep up with inflation and to ensure that employees can adapt to the cost of living. This usually comes into force in April, the start of the new financial year. In 2025, the minimum wage increased for over 21s to £12.21 an hour, up from £11.44, while the minimum wage for young people up to the age of 21 increased by over a pound for both 18–20 and 16–17 year olds. The minimum wage for apprentices also increased.
How does this impact employees?
Due to the minimum wage increases, you might find that your employees are less stressed about finances and are more motivated to perform well at work. Not only this, but they might be less likely to look around for a higher-paying job that does more than scrape the minimum wage.
How much should you pay your employees?
You must pay your employees at least the minimum wage to avoid prosecution and ending up on the wrong side of the law. However, many employers are uncertain whether they should pay their employees the minimum wage or more. It depends on a number of factors, including the skill level of the job, your financial situation, potential growth within your business, and your priorities. You shouldn’t go into debt paying your employees a salary, but you’ll still want to pay them what they’re worth, or else you might find that they look elsewhere for work. If you’re struggling to work out how much to pay your employees, or you’re concerned about being compliant with the new minimum wage regulations, you should speak to the professionals at The HR Dept. They’ll be able to help you make the right decision for you and your team and ensure that everyone’s happy. They might also be able to guide you on the average pay within your industry and among your competitors.
How will this affect you?
There are many ways in which the minimum wage increase could affect you. For instance, this will put more pressure on your finances due to the increased cost of your payroll. You might feel the strain and be unable to reinvest in your company the way you usually do – or even pay yourself. If you’re struggling financially, you should consider speaking to a financial advisor. This financial advisor will be able to assess your current situation and find avenues that will allow you to increase your profit margins, save for the future, and prevent yourself from falling into further debt. When you’re looking for a financial advisor, though, you need to make sure you hire one with ample experience that has dealt with businesses like yours in the past.
If the financial strain is too much for you, you might end up needing to let some of your employees go. Although this isn’t a situation that anyone wants, if you’re unable to keep your finances afloat, you might need to downsize your team and give each person more responsibilities or more shifts. By doing this, you’ll be decreasing the number of people that you need to pay while ensuring that the people you do employ get the wage that they deserve. However, you should make sure that you follow all legalities in terms of making people redundant. You should also be transparent with your team members about the situation that you find yourself in, or else you could find that you have built up a culture of mistrust and that your company experiences a dip in morale.
Not only may you have to let people go, but you might not be able to implement the recruitment drives that you’ve planned for 2025 and beyond as this could knock your finances over the edge. This might mean that you have to pull and close job advertisements. You might also have to slash costs in other ways, such as ending software subscriptions, cutting down on employee benefits, and trying to digitize the majority of your files, documents, and processes.
