How Employers Can Manage the 2025 NIC Increase

Impact of Employer NIC Increases

The upcoming changes to employer National Insurance Contributions (NICs) will have a significant financial impact on businesses across the UK. With the rate rising to 15% and the secondary threshold being lowered, employers will need to manage higher costs for every employee earning above the new threshold.

To help you understand these changes, we’ve outlined the key figures in the table below. This side-by-side comparison highlights how the new rates and thresholds differ from the current system, as well as the increased support offered through the enhanced Employment Allowance.

Use this information to assess how the changes will affect your business and start planning your strategy for managing the additional costs effectively.

Example Scenario: How the 2025 Employer NIC Changes Impact Costs

To illustrate the impact of the Employer NIC changes, let’s look at an example scenario for an employee earning £30,000 per year.

Current Employer NIC (2024)

1. NIC Rate: 13.8%
2. Secondary Threshold: £9,100

Calculation:

• Employer NIC is applied to the portion of salary above the secondary threshold.
• £30,000 – £9,100 = £20,900 (taxable earnings).
• £20,900 × 13.8% = £2,884.20.

Employer NIC from April 2025

1. NIC Rate: 15%
2. Secondary Threshold: £5,000

Calculation:

• £30,000 – £5,000 = £25,000 (taxable earnings).
• £25,000 × 15% = £3,750.

Strategies to Manage the Impact

1. Use the Enhanced Employment Allowance

The Employment Allowance will rise from £5,000 to £10,500 per year, providing significant relief for smaller employers.

• This allowance offsets employer NIC liabilities, effectively neutralising the impact of the rate increase for many SMEs.
• Businesses should ensure they are eligible and take full advantage of this increased allowance.

2. Implement Salary Sacrifice Schemes

Salary sacrifice schemes allow employees to exchange part of their salary for non-cash benefits, such as:

• Pension contributions
• Childcare vouchers
• Cycle-to-work schemes

These arrangements reduce the gross salary on which NICs are calculated, lowering liabilities for both employers and employees. Employers should:

• Ensure compliance with tax regulations.
• Communicate clearly with employees about how this affects their take-home pay and entitlements.

3. Review Workforce Structure

Reassessing your workforce can uncover cost-saving opportunities, such as:

• Introducing flexible working arrangements.
• Hiring part-time roles for specific tasks.
• Outsourcing non-essential functions.

While this can reduce NIC liabilities, it’s important to consider how changes might affect operations and employee morale.

4. Invest in Training and Development

Investing in employee training and development enhances skills and productivity, allowing businesses to achieve more with existing resources. This can:

• Offset additional costs from higher NICs.
• Improve efficiency and output.

5. Offer Tax-Efficient Benefits

Employers can provide benefits that are exempt from NICs to add value for employees without increasing liabilities. Examples include:

• Certain health and wellbeing programs.
• Tax-efficient company cars with low emissions.
• Childcare and educational support schemes.

Reviewing your benefits package can lead to substantial savings.

6. Plan for Future Budgeting

Incorporating the NIC increases into your financial planning is critical.

• Adjust budgets now to account for the higher rates and lower thresholds.
• Set aside funds to cover the additional costs, reducing the risk of financial strain in 2025.

Why this Matters