From 6 April 2025, employer National Insurance (NIC) goes up from 13.8% to 15%. The point where it starts falls from £9,100 to £5,000 of each employee's pay a year. In our last post we set out what this costs.
This post looks at what you can do about it. Here are six ways to manage the extra cost.
1. Claim the Employment Allowance
The Employment Allowance reduces your employer NIC bill. From April 2025 it rises from £5,000 to £10,500 a year. The rule that stopped employers with an NIC bill of £100,000 or more from claiming is going.
The allowance is not automatic. You claim it through your payroll software each tax year. Other eligibility rules still apply, so check you qualify.
2. Use salary sacrifice
With salary sacrifice, an employee gives up part of their salary in return for a benefit. Common examples are extra pension contributions and the cycle to work scheme.
For these two, the employee's pay is lower, so both you and the employee pay less NIC. Not every salary sacrifice arrangement saves NIC, so check before you set one up. An employee's pay after the sacrifice must not fall below the National Minimum Wage.
3. Hire under-21s or apprentices under 25
You pay no employer NIC on the pay of employees under 21, or apprentices under 25 on a qualifying apprenticeship, up to £967 a week (£50,270 a year). You still pay employer NIC on anything above that.
For many small employers this means no employer NIC at all on these staff.
4. Consider an employee share scheme
Schemes such as the Enterprise Management Incentive (EMI) or Save As You Earn (SAYE) let employees own shares in a tax-efficient way. Qualifying shares and options can often be given without NIC, but not in every case. They reward staff in a different way to pay and are not a direct replacement for it.
These schemes have rules and need setting up properly. Take advice first.
5. Review staff benefits
Some rewards cost little and carry no tax or NIC. Examples are extra holiday, flexible working and training that helps someone in their job.
Take care with other benefits. Most taxable benefits, such as a company car, carry Class 1A NIC for the employer. That rate also rises to 15% from April 2025.
6. Plan part-time hours
The National Living Wage for workers aged 21 and over rises to £12.21 an hour from April 2025. NIC is worked out each pay period. For an employee paid weekly, employer NIC starts at £96 a week. At £12.21 an hour, that is about 7.86 hours a week.
Below that level there is no employer NIC. Above it, you pay 15% on the pay over the threshold.
Summary
The NIC rise from April 2025 will cost many employers more. But there are ways to reduce the cost: claim the Employment Allowance, use salary sacrifice, use the reliefs for young employees and apprentices, reward staff in other ways, and plan hours.
The right mix depends on your business. If you would like us to look at your payroll before April, book a call or contact us.