How will increased Employers NI affect your payroll?
The announcement of a rise in employer National Insurance (NI) contributions is a concern for UK SMEs.
Business owners and directors are faced with the pressure of balancing profitability with rising overhead costs, especially when it comes to meeting payroll commitments.
The Context: National Insurance Contribution Increase
From April 2025, employers in the UK will see National Insurance Contributions (NICs) increase by 1.2 percentage points to 15% together with a second hit due to the lowering of the secondary threshold (ST) which means employers will start to pay NICs on employees’ earnings from £5,000 instead of the current £9,100 threshold, effectively increasing payroll costs by approximately 3%. For SMEs, this is an additional cost that has placed further strain on already-tight margins. While the increase is designed to fund improved public services, the reality for businesses is that it adds a substantial cost to wages.
For SMEs, payroll is often one of the largest expenditures. Therefore, any increase in employment-related taxes—such as NI contributions—has an immediate and visible effect on the bottom line. The challenge is not only to absorb this additional cost but also to find ways to maintain or increase productivity and profitability in the face of growing operational expenses.
Improving productivity can mitigate the negative financial impact of higher NI contributions, and ultimately help your business remain competitive, profitable, and sustainable. Bob Hart of WLP has written an article on how improving productivity in your business can mitigate the impact of the increase in NICs. Read the full article here: WLP
Request access to WLP’s Employer NI estimator to calculate the annual impact to a businesses payroll