The Chancellor’s budget has raised National Insurance on workers’ earnings above £5,000 from April 2025, with the rate increasing from 13.8% to 15%, but it’s also increased the Employment Allowance, allowing small companies to reduce their NI liability, from £5,000 to £10,500.
If you’re in an SME affected by National Insurance increases, I have a few ideas to find the extra pounds to pay your increased payroll costs:
- Consider Contractors Over Full-Time Hires
As the employer NI costs increase, think about bringing on contractors who work on a day rate rather than traditional full-time employees. With contractors, you can hire on a project basis, avoid ongoing NI contributions and can bypass expenses related to employee benefits. To ensure you comply with IR35, reach out and I’ll help you! - Audit Your Operational Costs, Especially IT Services
IT services are commonly overlooked during budget cuts, yet they can represent a substantial, and often redundant, cost for small businesses. Audit all subscriptions, software licenses, and user accounts to find underutilised or duplicated resources. Cutting unused accounts can lead to considerable savings that can be redirected toward rising NI costs. - Leverage Flexible Working Arrangements to Reduce Overheads
Consider a hybrid or remote work model if it’s feasible. Allowing employees to work from home on certain days can enable you to downsize office space, saving on rent, utilities, and maintenance costs. These savings can help offset increased NI contributions without impacting your employee experience or productivity. Think about how maintain your company culture – DM me and I’ll give you some ideas! - Explore Salary Sacrifice Arrangements
Salary sacrifice schemes, where employees trade a portion of their salary for non-cash benefits like additional pension contributions, childcare vouchers, or bike-to-work programs, can be advantageous. This approach can reduce both the employee’s and employer’s NI contributions, potentially offsetting the impact of higher NI costs. Just ensure these benefits are appealing to employees and align with their needs. We do an awesome piece of work around salary and benefit benchmarking – DM me for more details. - Invest in Productivity-Boosting Technology
Sometimes, targeted investments can save more than they cost. Look for automation tools and software solutions that streamline labour-intensive tasks (like invoicing, payroll, and data entry) to increase productivity without expanding headcount. Such efficiencies can reduce the need for additional hires, helping to mitigate the impact of rising employer NI costs. A great HRIS and ATS can reduce manual HR work – ask us and we’ll tell you how to choose your next HR system.
Angela Rieu-Clarke, MD, Buzzqube
