Insights

The UK government has announced significant changes to Employer’s National Insurance (NI) contributions, set to take effect from April 2025

1. The employer’s NI rate will increase from 13.8% to 15.0%
2. The contribution threshold (Secondary Threshold) will be reduced from £9,100 to £5,000

These changes will impact businesses in several ways:

• Increased costs: For example, an employer with an employee earning £30,000 will face an additional £866 in NI costs for that employee
• Disproportionate impact: Sectors with large workforces earning lower wages, such as hospitality and leisure, will be more significantly affected
• Potential job market effects: The changes may impact job creation and limit salary increases

To mitigate these rising costs, businesses can consider:

• Reviewing non-essential spending
• Job reshuffling and role redesign
• Exploring salary sacrifice options

The government has increased the Employment Allowance from £5,000 to £10,500 to help protect small businesses. However, larger employers are likely to be hit hardest by these changes.

What measures can businesses take to mitigate the impact of the NI increase

• Review and optimise payroll budgets to account for the higher NI rate and lowered threshold
• Improve workforce efficiency and productivity to offset increased NI expenses
• Consider implementing salary sacrifice schemes, where employees exchange part of their salary for non-cash benefits, reducing NI liabilities for both employers and employees
• Analyse the budget thoroughly and consult with an accountant to understand the financial impact
• Review pension arrangements, particularly considering the net pay method through salary sacrifice schemes, which can help save on NI tax
• Explore sector-specific tax incentives, such as creative industries tax relief or research and development tax relief
• Investigate green energy tax cuts and incentives for adopting environmentally friendly business practices
• Maximise the use of allowable expenses to reduce the overall tax bill
• Take advantage of the increased Employment Allowance, which will rise from £5,000 to £10,500, to offset NI liabilities
• Consider restructuring roles or adjusting part-time and flexible work arrangements to manage costs effectively
• Review pricing strategies and potentially pass on some costs to customers, ensuring clear communication about any changes
• Explore apprenticeship programs, which can provide cost-effective training and potential long-term employees

By implementing a combination of these strategies, businesses can work to minimise the impact of the NI increase on their operations and finances.

What are some cost-saving measures businesses can implement to offset the NI increase

• Implement salary sacrifice schemes: Employees can exchange part of their salary for non-cash benefits, reducing NI liabilities for both employers and employees
• Optimise workforce planning: Restructure roles, adjust part-time and flexible work arrangements, and prioritise efficiency to improve productivity
• Offer flexible working arrangements: Reduce office space and associated costs by allowing remote work or flexible hours
• Review and reduce non-essential spending: Cut back on areas such as travel, office supplies, or outsourcing

Discover how Neuven can support by optimising your workforce management solutions.

Call 07944 571 962
Email ian.roth@neuven.co.uk