The government has previously announced changes to employer National Insurance contributions (NICs), which will take effect from 6th April 2025. These changes will increase employment costs, particularly due to a reduction in the Secondary Threshold, meaning businesses will pay National Insurance on a greater portion of employees’ earnings.
While this reform is expected to generate additional revenue for public services, it will also impact business budgets, particularly for sectors with large or lower-paid workforces. Below, we outline the key changes, their implications, and how employers can prepare.
Key Changes to Employer NICs
Increased NIC rate
From April 2025, the employer NIC rate will rise from 13.8% to 15%.
Lower Secondary Threshold – a major cost impact
The Secondary Threshold, the point at which employers start paying NICs on an employee’s earnings, will drop from £9,100 per year to £5,000 per year.
- This is a key factor driving higher costs, as more of each employee’s wages will now be subject to employer NICs.
Rising payroll costs for businesses
- Employers will face higher payroll expenses, especially those with larger workforces.
- Sectors such as retail, hospitality, and social care, which typically employ lower-paid workers, will be particularly affected.
Salary sacrifice as a cost management tool
- Salary sacrifice schemes are not impacted by this change but remain a useful tool for managing payroll costs.
- Employers may consider expanding these schemes to help offset some of the increased NIC burden.
Implications for businesses
These changes will result in:
- Higher employment costs – Payroll budgets will need adjusting as NIC costs increase.
- Potential hiring slowdowns – Some businesses may reconsider recruitment or expansion plans.
- Workforce strategy adjustments – Employers may need to review salary structures and benefits to manage costs effectively.
How can employers prepare?
If your business will be affected by the employer NIC rise, here’s how you can plan ahead:
- Review payroll costs – Assess the financial impact and adjust budgets accordingly.
- Explore salary sacrifice schemes – These can help reduce employer NIC costs and benefit employees.
- Factor changes into workforce planning – Consider how the additional costs affect hiring decisions.
- Seek professional advice – Our payroll specialists at SMH Group can help you navigate these changes and identify cost-saving strategies.
The rise in employer NICs will bring new financial pressures, but with careful planning, businesses can navigate these changes effectively.
For advice on managing the impact of rising National Insurance costs, contact SMH Group on 01142 664 432 or email info@smh.group.
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