National Insurance and Sick Pay Changes from April 2025: What UK employers need to know
As we approach 6th April 2025, UK employers need to prepare for some key payroll changes. National Insurance Contributions (NICs) are shifting, and reforms to Statutory Sick Pay (SSP) could impact how you support your workforce. Here’s what you need to know to stay compliant and ahead of the game.
Employer National Insurance Contributions (NICs) are increasing
The cost of employing staff is set to rise, with changes to employer NICs:
- Secondary NIC Threshold Reduction – The threshold at which employers start paying NICs for employees will drop from £9,100 to £5,000, meaning you’ll start paying contributions sooner.
- Employer NIC Rate Increase – The rate is increasing from 13.8% to 15%, raising employment costs for businesses.
- Employment Allowance Increase – To help offset some of the costs for smaller businesses, the Employment Allowance will rise to £10,500, allowing eligible employers to reduce their NIC bill.
With these changes in mind, it’s important to review your payroll budgets and factor in the increased costs for 2025.
Statutory Sick Pay (SSP) reforms: removal of waiting days and more
Big changes are on the way for sick pay, making it more accessible for employees:
- Waiting Days Scrapped – Currently, SSP is not paid for the first three ‘qualifying days’ of absence. From April 2025, SSP will be payable from the first day of sickness. This could increase payroll costs for businesses with high sickness absence rates.
- Lower Earnings Limit Removed – At present, employees earning less than £123 per week don’t qualify for SSP. This restriction will be lifted, meaning low earners will now be eligible for sick pay, expanding coverage to around 1.3 million more workers.
- New Payment Calculation – Instead of a flat rate, SSP will be set at the lower of £118.75 per week or 80% of the employee’s average weekly earnings, ensuring a fairer alignment with actual pay levels.
The 28-week SSP limit and linked periods of sickness
While these reforms improve access to sick pay, the maximum period an employee can claim SSP remains at 28 weeks in any single period of sickness absence.
However, SSP entitlement is cumulative for linked periods of sickness. A ‘linked period’ occurs when an employee has multiple periods of illness lasting four or more days each, with gaps of eight weeks or less between them. In these cases, the sickness absences are treated as one continuous period, and SSP entitlement continues until the 28-week limit is reached.
For example:
- An employee is off sick for six weeks, returns to work for seven weeks, then becomes sick again with the same condition.
- As the second absence started within eight weeks of the first, the two absences are linked.
- This means their SSP entitlement will continue from where it left off, rather than resetting.
For employers, it’s crucial to track sickness absences carefully to ensure SSP is paid correctly and employees are aware of when their entitlement will run out.
What this means for employers
These changes mean higher costs and potential administrative adjustments, so it’s crucial to plan ahead:
- Review Payroll Budgets – Factor in the higher NIC costs and potential increase in SSP payments.
- Update Policies – Amend your sick pay policies to reflect day-one eligibility.
- Monitor Long-Term Sickness Cases – Ensure you’re tracking how employees reach the 28-week limit, including linked periods.
- Check Eligibility for the Employment Allowance – If your business qualifies, this will help reduce the financial burden.
While these reforms aim to create a fairer system for workers, they place extra costs on employers. Getting ahead of the changes now will help avoid any payroll headaches come April.
Got questions about how these updates impact your business? Let’s talk.
