Quick answer: From April 2025 the National Living Wage increased to £12.21 per hour and the employer National Insurance Contributions rate rose from 13.8% to 15%, with the NIC threshold reduced from £9,100 to £5,000 per year. The combined effect on labour-intensive cleaning and FM contracts is significant — particularly for contracts priced before April 2025 that do not include cost escalation clauses. Cleaning companies should review all contract pricing and assess whether existing contracts remain commercially viable under the new cost base.
The cleaning industry is one of the most labour-intensive sectors in the UK economy. Labour typically accounts for 60–70% of contract cleaning costs, which means that changes to the National Living Wage and employer National Insurance Contributions have a disproportionately large impact on cleaning businesses compared to sectors with lower labour-to-revenue ratios.
The April 2025 changes — a National Living Wage increase to £12.21 per hour and an employer NIC rate increase from 13.8% to 15% with a simultaneous threshold reduction from £9,100 to £5,000 — represent the largest single-year increase in employment costs the cleaning industry has faced in recent memory.
The combined cost impact
For a cleaning operative working full-time at National Living Wage, the April 2025 changes produce a combined employer cost increase from both the wage increase and the NIC changes. The NIC threshold reduction is particularly significant for part-time and variable-hours workers — the lower threshold means that employer NIC becomes payable at a lower earnings level, increasing the NIC cost on lower-hours contracts that previously fell below or close to the old threshold.
For cleaning companies with large part-time workforces — common in commercial cleaning where early-morning or evening shifts are the norm — the threshold reduction affects a much larger proportion of the workforce than a rate-only change would.
Contract pricing review
Cleaning contracts priced before April 2025 that do not include annual cost escalation clauses linked to NLW or NIC changes may now be priced below the break-even cost of delivery. Cleaning companies should:
- Identify all contracts currently priced on a pre-April 2025 labour cost basis
- Calculate the revised cost of delivery at £12.21 NLW and 15% NIC rate with the reduced threshold
- Assess whether each contract remains commercially viable under the new cost base
- Review contract terms for cost escalation provisions and engage with clients on repricing where contracts are loss-making
- Factor updated labour costs into all new contract pricing from April 2025 onwards
EPR packaging costs — additional pressure
Alongside the NLW and NIC changes, the Extended Producer Responsibility (EPR) scheme is shifting the cost of packaging waste collection, recycling and disposal to the businesses that use packaging. Cleaning chemicals are typically supplied in plastic containers that fall within EPR scope. The EPR cost is primarily borne by chemical suppliers and passed through in product pricing — cleaning companies should factor potential chemical cost increases into contract pricing reviews alongside direct labour cost impacts.
Related guidance
Cleaning trade hub Facilities management hub Employment Rights Act 2025 Waste separation rules 2025
