Navigating the 2025 Employers’ National Insurance Hike: Strategies for SMEs to Stay Resilient

The rise in employers’ National Insurance contributions (NICs) in 2025 is set to challenge small and medium-sized enterprises (SMEs) across the UK.

With mounting payroll costs, tighter margins, and evolving employment regulations, business owners must act now to mitigate the impact.

What’s Changing in 2025?

From April 2025, the employers’ NIC rate will increase from 13.8% to 15%. Additionally, the secondary threshold—the earnings level at which NICs become payable—will drop from £9,100 to £5,000 per year.

To offset these costs, the Employment Allowance will rise from £5,000 to £10,500, and the £100,000 eligibility threshold will be removed, offering some relief to smaller businesses. However, for many, the net effect remains a significant financial burden.

The Impact on SMEs

While some businesses will benefit from the increased Employment Allowance, others will face higher staff costs, cash flow pressures, and squeezed profit margins. The Centre for Policy Studies estimates that employers’ NICs for minimum wage employees will rise from £1,617 to £2,583 per year. The Office for Budget Responsibility (OBR) predicts these changes will add 2% to overall payroll costs, with businesses absorbing 40% of this increase through reduced profits.

Proactive Measures to Offset Costs

Rather than waiting until the changes take effect, many SMEs are already taking action. Here are some key strategies:

• Enhance financial management: Strengthen bookkeeping, financial reporting, and forecasting to identify cost-saving opportunities and prevent cash flow issues.

• Leverage tax reliefs: Ensure eligibility for the increased Employment Allowance and explore research and development (R&D) tax credits.

• Optimise staffing and operations:

  • Introduce salary sacrifice schemes for pension contributions.

  • Consider outsourcing functions like payroll, HR, and marketing.

  • Use self-employed contractors where feasible.

  • Implement AI and automation to enhance efficiency.

• Adjust workplace structure: Remote work opportunities could allow for downsizing office space and reducing overheads.

• Negotiate supplier contracts: Renegotiating terms can yield significant savings.

• Explore market shifts and expansions: Pivoting to more profitable sectors or expanding internationally could open new revenue streams.

• Encourage staff collaboration: Employees often have valuable insights on cost-saving measures.

Finding Strength in Adversity

While the 2025 employers’ NIC rise presents hurdles, proactive planning and adaptability will be key to not just surviving but thriving in the face of change. By implementing smart financial strategies and operational efficiencies, SMEs can weather the storm and emerge stronger.

Contact Zyla Accountants today for support with your tax and accounting requirements.