How the April 2025 National Minimum Wage and National Insurance increases could impact the profitability of your contracts

The government has announced increases on the rates of the National Minimum Wage and National Insurance contributions, set to take effect on 1 April 2025. These changes will affect the profitability and sustainability of contracts, particularly impacting care providers and those managing agreements with councils.

For many providers, these increases could mean that the cost of delivering care will exceed the income generated from existing contracts. To ensure your contracts remain profitable and sustainable, it’s crucial to act now and review how these changes will affect your agreements.

What should you do to prepare?

Review your contracts now

• Calculate the financial impact of these changes on your contracts.

• Look for clauses that allow you to increase prices, such as annual price adjustments or provisions for requesting a price review.

Engage with the council

• If the contract doesn’t allow price adjustments, discuss the issue with the council. Highlight that continuing the contract beyond April could result in financial losses and request an uplift to cover the increased costs.

Confirm the termination notice period

• As a final resort, if the contract does not permit a price increase or a price review and the council will not agree to an uplift, you may need to consider terminating your contract if it will no longer be profitable. Identify the notice period in your contract and ensure you leave enough time to serve notice properly if needed.

• Keep in mind your contract’s notice period. If you wait until April to review, you might be locked into a contract which no longer makes a profit for months.

Key considerations before serving notice

Remember that before serving a notice to terminate your contract, you will need to ensure this is done in accordance with the terms of the contract, otherwise the notice may be deemed to be invalid. Care should be taken as you may only be able to terminate your contract in certain circumstances and without proper grounds to terminate you may be required to pay additional costs to the council.