April 2025 has brought a series of financial and legislative changes that are significantly increasing the cost of employment for businesses. While each change may appear manageable in isolation, their cumulative effect has placed considerable pressure on employers across all sectors, especially SMEs and organisations operating on tight margins.

At our firm, we are seeing a growing number of clients facing difficult decisions, including the prospect of redundancy consultations. Below, we outline the key changes and why, for many, redundancies are no longer a matter of choice but of necessity.

1. Increase in National Insurance contributions: Employer National Insurance (NI) contributions have gone up by 1.2%. This means employers must now pay more tax for each employee. For businesses with large teams or lower-paid staff, this increase has a big impact. It makes it more expensive to keep people in jobs.
2. Minimum Wage and Living Wage rises: The 6.7% increase in the National Living Wage is significantly higher than the rate of inflation, as the government has adjusted the rules to ensure wages better reflect the cost of living. The National Minimum Wage (NMW) for 18 to 20-year-olds has also risen from £8.60 to £10.00 per hour – the largest increase on record. The government states that this is the first step toward aligning the National Minimum Wage and National Living Wage, with the aim of creating a single adult wage rate.
3. Lower NI thresholds: The amount employees can earn before employers start paying NI has gone down. The threshold that employers start paying NI on an employee’s earnings fell from £9,100 to £5,000 a year. This means employers now start paying NI on lower earnings than before. Even part-time or lower-paid staff now cost more in NI contributions.

In addition to the above, we would like to highlight an important update regarding statutory redundancy pay. From 6 April 2025, the weekly cap for calculating redundancy pay has risen to £719. While this will increase costs for employers, it is a positive change for employees, particularly long-serving staff, as it ensures higher redundancy payouts. This adjustment reflects the rising cost of living and provides better financial protection for those impacted by redundancy. Employers should be aware of this change, as it will affect the overall cost of any redundancy processes.

For many employers, redundancies are no longer a choice but a financial reality. Rising staff costs make it increasingly difficult to keep businesses afloat without making tough decisions. If you are facing redundancy or changes at work, our team is here to help. We will guide you in understanding your rights, checking if your redundancy is fair, and supporting you through any settlement offer.