How does the Budget affect the BCIS Price Adjustment Formulae Indices and other services?

The Autumn Budget introduced several important changes to the National Living Wage and National Insurance contributions (NICs) that will impact labour costs from April 2025. These need to be factored into tenders going forward and, depending on clauses included, it may be possible to address them in existing construction contracts running into and beyond April 2025.

Government announcements

National Insurance contributions: The government is increasing the rate of employer National Insurance contributions (NICs) from 13.8% to 15% and reducing the per-employee threshold at which employers become liable to pay National Insurance (the Secondary Threshold) to £5,000 from 6 April 2025.

The government is also increasing the Employment Allowance to £10,500 next year and removing the £100,000 eligibility threshold.

National Living Wage increase: From 1 April 2025 the National Living Wage will increase to £12.21 per hour for all eligible employees, and the National Minimum Wage for 18–20-year-olds will increase to £10.00 per hour for all eligible workers.

The government is also increasing the minimum wages for Under 18s and Apprentices to £7.55 per hour, and the Accommodation Offset rate will increase to £10.66 a day.

Incorporating the changes into BCIS services

The Price Adjustment Formulae Indices (PAFI) will be adjusted for the changes in Employer’s National Insurance contributions and, where applicable, the National Living Wage.

Changes to the National Living Wage will affect some of the lower paid staff covered by the nationally agreed wage awards. It is possible that the wage negotiating bodies will issue revised wage agreements to cover these changes.

These changes will be applied to the labour rates included in the work category indices series and to the labour indices in resource cost indices.

These changes will apply to any contract with a Base Date prior to the Budget announcement.

The effect of these changes on manufacturers and suppliers of materials and components will be reflected in the prices included in the material inputs to the indices.

If you are using PAFI on your contracts these changes will apply automatically.

PAFI is available to subscribers of BCIS CapX.

Contracts not covered by formulae fluctuations

Existing contracts not covered by formulae fluctuations may contain clauses that allow for adjustments to the contract sum in respect of changes to tax, levies and contributions which the contractor is legally required to pay.

Labour costs and other indices

The BCIS data team has been working to build in the updates and they will be visible in the relevant construction cost indices, maintenance and cleaning cost indices, Dayworks, Measured Term Contract Updating Percentages and the Price Adjustment Formulae Indices series in April and May 2025, depending on the series.

The changes will also be factored into 2Q2025 forecasts in the fourth quarter BCIS Briefings for Building, Civil Engineering, and Maintenance, Cleaning and Energy, which are due to be published in December.

Cleaning and maintenance indices are available to subscribers of BCIS Opx. Full access to PAFI is available to subscribers of BCIS CapX.

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