The upcoming increase in employer National Insurance Contributions (NICs) in the UK, set to rise from 13.8% to 15% from 6 April 2025, along with the reduction of the secondary threshold from £9,100 to £5,000, will significantly impact business costs. 

To mitigate these effects, employers can consider the following strategies:

1. Use the Enhanced Employment Allowance

The Employment Allowance, which offsets employer NIC liabilities, will increase from £5,000 to £10,500 per year starting April 2025. 

This enhancement allows eligible employers to reduce their NIC bill, effectively neutralising the impact of the rate increase for many small businesses.

2. Implement Salary Sacrifice Schemes

Salary sacrifice arrangements enable employees to exchange a portion of their salary for non-cash benefits, such as pension contributions or childcare vouchers. This reduces the gross salary on which NICs are calculated, lowering both employer and employee NIC liabilities. However, it’s essential to ensure that such schemes comply with current tax regulations and do not adversely affect employees’ entitlements.

3. Review Workforce Structure

Assessing the composition of the workforce can identify opportunities for cost savings. Employers might consider flexible working arrangements, part-time roles, or outsourcing certain functions to manage NIC liabilities more effectively. However, it’s crucial to balance these changes with operational needs and employee morale.

4. Invest in Training and Development

Enhancing employee skills can lead to increased productivity, allowing businesses to achieve more with the same or fewer resources. This approach can offset the additional costs incurred from higher NIC rates by improving overall efficiency and output.

5. Explore Tax-Efficient Benefits

Offering benefits that are exempt from NICs, such as certain health and wellbeing programs, can provide value to employees without increasing NIC liabilities. Also, reviewing the types of company cars offered to employees and removing vehicles with high emissions could help reduce Employers’ NIC payable on overall car benefits provided. 

6. Plan for Future Budgeting

Incorporating the anticipated NIC increases into financial planning allows businesses to adjust budgets accordingly. This proactive approach ensures that the additional costs are accounted for, reducing the likelihood of financial strain when the changes take effect.

We can help

We can provide tailored strategies to manage NIC liabilities effectively. Please call if you are concerned about the effects of this increase on your business performance.

The proposed increases to the UK National Minimum Wage (NMW) and National Living Wage (NLW) set for April 2025 are expected to impact employers and employees significantly. Here’s how various sectors might feel these changes:

1. Financial Pressures on Employers: With the NLW expected to rise to approximately £12.21 for those over 21, and NMW rates for younger employees also set to increase, businesses across the UK, particularly in sectors like retail and hospitality, face substantial cost increases. It’s estimated that these changes will add around £3 billion to labour costs, with smaller businesses that operate on tight margins potentially feeling the strain the most. According to the Low Pay Commission, this increase will require employers to adjust wages further up the pay scale to maintain differentials between roles, all of which adds pressure to wage budgets.
2. Benefits for Low-Wage Workers: The wage boost is expected to positively impact approximately three million employees, helping lift earnings closer to the “real living wage” and offering support amid rising living costs. This uplift aligns with the Labour government’s goal to tie the NLW to two-thirds of median wages, aiming to improve income equality across the workforce. As reward consultant Duncan Brown noted, while wage increases alone might not solve all the issues affecting low-wage earners, they play a crucial role in addressing in-work poverty.
3. Productivity and Workforce Planning: While the wage hikes aim to support employees, businesses may need to adopt productivity-boosting measures to counterbalance the higher costs. Charles Cotton of CIPD advised that companies consider smarter working methods rather than relying on passing the increased costs onto consumers, which may not be sustainable long-term. Investment in workforce training and upskilling is one potential strategy, which could help companies get more value from their labour costs and better retain talent amidst competitive wage increases.
4. Social and Policy Context: Experts like Tony Dobbins from the University of Birmingham highlight the importance of integrating wage increases within a broader social policy framework, suggesting that additional support for essentials such as housing and utilities is necessary to fully address in-work poverty. The idea of a “social wage” goes beyond basic wage increases, advocating for a more comprehensive support structure to alleviate financial stress for lower-income workers and create a more sustainable living wage environment.

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In summary, the planned April 2025 wage increases are set to offer substantial support to lower-paid workers, although they present real challenges for businesses in managing costs and maintaining wage structures. Employers may need to focus on productivity improvements and training investments to balance these increases in a way that supports both staff and operational sustainability.

The government has unveiled new measures to support small businesses and the self-employed by tackling the scourge of late payments, which according to the Smart Data Foundry is costing SMEs £22,000 a year on average and according to FSB research, leads to 50,000 business closures a year.

The government will consult on tough new laws which will hold larger firms to account and get cash flowing back into businesses – helping deliver our mission to grow the economy.

In addition, new legislation being brought in the coming weeks will require all large businesses to include payment reporting in their annual reports – putting the onus on them to provide clarity in their annual reports about how they treat small firms. This will mean company boards and international investors will be able to see how firms are operating.

Enforcement will also be stepped up on the existing late payment performance reporting regulations which require large companies to report their payment performance twice yearly on GOV.UK.

Under current laws, responsible directors at non-compliant companies who don’t report their payment practices could face criminal prosecutions including potentially unlimited fines and criminal records.

The consultation which will be launched in the coming months, will also consider a range of further policy measures that could help address poor payment practices.

Research shows that every quarter in 2022, 52% of SMEs small firms in the UK suffer from late payments, meaning roughly 2.8 million small firms face this issue, with the Federation of Small Businesses describing it as one of the biggest problems facing SMEs.

Late payments are just one element of the problem, with some SMEs forced to wait months for contracts to be fulfilled and some are even forced to take out loans against their own homes to manage cash flow.

Cracking down on late payments will unlock growth for 5.5 million small firms by enabling them to invest their time hiring more employees, boosting wages, and exporting around the world, rather than chasing down late payments.

The Business Secretary will hold a joint call with the Federation of Small Businesses later today to outline to SME leaders the work the Department will undertake to put in place tough new laws to end bad payment culture. New proposals, subject to consultation, will be bought forward on audit and audit committees, in order to help rebuild small businesses’ trust that they will be paid on time.

New regulations that prohibit employers from withholding tips for employees in the hospitality, leisure, and services sectors took effect on 1 October 2024. This change follows the enactment of The Employment (Allocation of Tips) Act 2023, commonly referred to as the Tipping Act, along with the statutory Code of Practice on the fair and transparent distribution of tips, which also took effect on 1 October 2024.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would have otherwise been deducted. These new measures apply in England, Scotland and Wales. Employment policy is devolved to Northern Ireland.

Employers who violate these rules could face fines or be required to compensate their staff. Workers will have the ability to hold their employers fully accountable through employment tribunals.

The statutory Code of Practice provides businesses with advice on how tips should be distributed among staff. The Code of Practice is statutory and has legal effect, meaning it can be introduced as evidence in an employment tribunal.

There are specific customs requirements for commercial goods that you take with you to sell abroad. You must declare any goods intended for sale outside the UK, whether they are in your baggage or a private vehicle.

The regulations for commercial goods or samples carried by passengers in their accompanied baggage are known as Merchandise in Baggage (MIB). As of January 2024, the threshold for simplified declarations of MIB increased to £2,500 (increased from £1,500). If your goods fall below this threshold, you can make a simple online declaration within five days before your departure.

A full export declaration is necessary if the goods exceed £2,500 in value or if they are subject to excise duty or import/export restrictions.

For Northern Ireland, different rules apply. If you are taking commercial goods from Northern Ireland to Great Britain or the EU in your accompanied baggage, no declaration is required.

There are separate procedures for temporarily taking goods abroad (such as samples for a trade fair) or when using a courier or freight forwarder.