The Perfect Storm Arriving in April
Hospitality businesses are facing a significant cost increase in April 2025. The combination of National Living Wage increases and the employer National Insurance contribution rise announced in the October 2024 Budget creates a substantial hit to already thin margins.
For a business with 20 staff, largely paid at or near minimum wage, the combined impact could be £20,000-40,000 annually. That's not a rounding error—it's the difference between survival and closure for many.
Breaking Down the Impact
National Living Wage
The National Living Wage increases to £12.21 per hour from April 2025 for workers 21 and over. For hospitality, where many roles are paid at or near minimum wage, this directly increases the hourly cost of labour.
Employer National Insurance
The October 2024 Budget increased employer NI from 13.8% to 15% and lowered the threshold at which contributions begin from £9,100 to £5,000. This means:
- Higher rate on all earnings
- More earnings subject to contributions
- Double impact on low-wage employers
Combined Example
20-person restaurant, average 25 hours/week at minimum wage:
| Factor | Before April 2025 | After April 2025 | Increase |
|---|---|---|---|
| Hourly wage | ~£11.44 | £12.21 | +6.7% |
| NI rate | 13.8% | 15% | +1.2pp |
| NI threshold | £9,100 | £5,000 | -£4,100 |
| Annual labour cost | ~£310,000 | ~£340,000+ | ~£30,000 |
Illustrative calculation—your specific numbers will vary
These cost increases can't be easily offset by raising prices alone. Hospitality customers are price-sensitive, and competitors face the same pressures. Efficiency gains are essential.
Where Automation Saves Money
In a cost crisis, automation needs to deliver genuine savings. Here's where it can:
Labour Efficiency
Every hour saved is money not spent on wages.
Scheduling Optimisation:
- Better demand prediction means right-sized teams
- Fewer overstaffed quiet periods
- Reduced overtime from poor planning
- Lower cost from agency staff
Potential saving: 5-10% of labour costs from better scheduling alone
Task Automation:
- Self-service ordering reduces front-of-house requirements
- Digital reservations eliminate phone time
- Automated prep lists from sales forecasts
- Digital training reduces onboarding time
Potential saving: Variable, but each automation multiplies staff productivity
Procurement Savings
Better information leads to better buying:
Inventory Management:
- Accurate par levels reduce over-ordering
- Waste tracking identifies problems
- Purchase history enables negotiation
- Demand forecasting improves order timing
Potential saving: 2-5% of food costs from reduced waste and better purchasing
Admin Reduction
Back-office tasks consume expensive management time:
Automated:
- Payroll calculation and processing
- Tip distribution and reporting
- Invoice matching and payment
- Compliance documentation
Potential saving: Manager hours redirected to operations improvement
Tactical Automation for Tight Budgets
With costs rising, you can't afford expensive implementations. Here's what delivers value quickly and cheaply:
Priority 1: Scheduling Software
Why Now:
- Immediate visibility of labour costs
- Quick wins from better shift planning
- Low cost per user (£2-3/month typical)
- Fast implementation
Quick Start: Choose one tool, implement for all staff, use for 30 days, then optimise.
Priority 2: Demand Forecasting
Why Now:
- Informed scheduling decisions
- Inventory planning improvement
- Many POS systems include basic forecasting
- Data you already have, just not used
Quick Start: Review last 12 months of trading by day/week. Identify clear patterns. Use for scheduling and ordering.
Priority 3: Online Booking/Ordering
Why Now:
- Reduces phone handling time
- Available 24/7 without staffing
- Captures customer data automatically
- Often low-cost or commission-based
Quick Start: If not already live, implement online reservations this month. For quick-service, add online ordering for collection.
Priority 4: Automated Communications
Why Now:
- Booking confirmations without staff time
- Reservation reminders reduce no-shows
- Review requests automated
- Staff notifications for shift changes
Quick Start: Use booking system automated emails. Add SMS reminders if no-shows are a problem.
Each priority builds on the previous one. Don't try to do everything at once—implement in order, prove value, then move to the next.
Revenue Protection Through Automation
Cost-cutting alone isn't enough. Automation can also protect and grow revenue:
No-Show Reduction
Automated reminders typically reduce no-shows by 30-50%:
- Email confirmation on booking
- SMS reminder 24-48 hours before
- Easy reschedule options
- Deposit collection for high-risk bookings
Faster Table Turns
Self-service ordering and payment:
- Order when ready, not when staff available
- Pay immediately, not waiting for bill
- Potentially 15-20% faster turns at peak
Better Occupancy
For accommodation:
- Dynamic pricing based on demand
- Automated availability distribution
- Last-minute deal automation
- Booking abandonment recovery
Customer Retention
Automated marketing:
- Post-visit thank you emails
- Birthday/anniversary offers
- Lapsed customer reactivation
- Review management
Staff Cost Reality Check
Some hard truths about managing through cost increases:
You Probably Need to Raise Prices
Automation helps efficiency, but if costs rise 10% and margins were already thin, some price increase is unavoidable. Focus on:
- Value items that absorb increases less visibly
- Premium items where price sensitivity is lower
- Portion engineering rather than just price rises
Headcount Review Is Uncomfortable but Necessary
Automation should enable same output with fewer hours. This might mean:
- Reducing hours for existing staff
- Not replacing leavers immediately
- Restructuring shift patterns
- Combining roles
Handled well with technology, this can work. Handled poorly, it burns out remaining staff.
Investment Now Saves Later
Spending £2,000 on scheduling software that saves £200/month in labour efficiency pays back in 10 months. The longer you wait, the more costs you absorb.
Survival Checklist
Immediate (This Week)
- Calculate your specific cost increase
- Review current labour efficiency
- Identify biggest time-wasting processes
- Choose one automation to implement first
Short-Term (This Month)
- Implement first automation
- Review pricing strategy
- Analyse booking/footfall patterns
- Set up basic forecasting
Medium-Term (Before April)
- All priority automations live
- Staff trained and using new tools
- Processes optimised based on data
- Contingency plans for further cost pressures
The Bottom Line
April 2025's cost increases are significant but survivable. The hospitality businesses that thrive will be those that:
- Accept the new cost reality
- Implement efficiency-gaining automation
- Make difficult decisions about pricing and staffing
- Use technology to maintain service quality
Waiting isn't a strategy. The businesses preparing now will be better positioned than those who hope the problem goes away.
Need help preparing for the cost increases? We help hospitality SMEs implement practical automation that delivers genuine efficiency gains.
Book a consultation to discuss your specific situation and priorities.
