8 ways employers can manage the National Insurance increase and retain staff

The rise in employer NI contributions is expected to have a significant impact but here are ways to ease the pain for employers.

As the employer National Insurance Contribution (NIC) increase looms how will businesses adapt?

With the rate rising to 15% in April paired with a reduced secondary threshold, businesses are facing some tough decisions.

Hiring freezes, smaller pay raises, or reduced benefits might feel inevitable, but HR leaders are stepping up to rethink workforce costs without compromising employee retention or engagement.

It’s no surprise that 63% of businesses rank tax concerns, including NICs, as a top priority according to the British Chambers of Commerce.

But there’s good news: forward-thinking employers are finding creative ways to tackle these challenges.

From smarter workforce strategies to innovative compensation models, they’re turning a potential setback into an opportunity to keep employees engaged and their businesses thriving.

Key strategies to reduce NIC costs while retaining top talent:

1. Save big with salary sacrifice schemes

Salary sacrifice is one of the most immediate and effective ways to reduce NIC liabilities while offering meaningful benefits.

Employees exchange a portion of their salary for tax-efficient perks, such as pensions contributions, cycle-to-work schemes, electric vehicle leasing and additional annual leave.

As NICs are calculated on post-sacrifice earnings, both employers and employees pay less in tax - creating a win-win solution.

However, transparency is key.

Communicate the value of salary sacrifice clearly to ensure employees see it as a benefit - not a cut.

2. Prioritise perks over pay

Instead of increasing salaries (which raise NIC liabilities), focus on high-value, non-monetary benefits that enhance employee satisfaction.

We know that today’s workforce values flexibility, wellness and career growth as much as financial rewards.

Consider offering extra annual leave, enhanced health and wellness programmes, flexible hours, remote work options, and robust professional development budgets.

Strategic perks like these can drive retention and engagement without significantly expanding payroll costs.

3. Maximise government incentives and tax reliefs

Leverage available tax relief schemes to offset rising NIC costs.

Collaborate with your finance team to explore opportunities, such as:

Employment allowance: Small businesses can claim up to £10,500 against NICs from April 2025.
R&D tax credits: Businesses investing in innovation can reduce taxable profits.
Apprenticeships: Hiring apprentices unlocks government funding while reducing payroll costs.

Proactive planning ensures you’re not leaving money on the table.

4. Restructure your workforce model

Rethinking your workforce structure can lead to significant payroll savings while retaining talent.

Consider options such as outsourcing non-core functions (eg, IT, admin, payroll), using freelancers or contractors for project-based work and introducing part-time or job-sharing roles to optimise payroll costs.

A word of caution: ensure any changes align with your long-term talent acquisition and retention goals and involve employees in discussions to avoid negative perceptions, harming employee engagement and morale.

5. Upskill instead of hiring

Hiring new employees increases payroll taxes, benefits costs, and NIC liabilities.

Instead, maximise your existing workforce’s potential by cross-training employees to fill skill gaps, investing in leadership and management training and leveraging apprenticeship programmes (which come with government incentives).

A lean, highly skilled workforce helps HR leaders control costs while strengthening business resilience.

6. Leverage flexible and hybrid work

Whilst the debate rages on about remote working, as some organisations are calling their employees back to the office, there are pros and cons which employers must weigh up.

When it comes to cost saving, flexible working has its benefits.

It reduces office space costs (rent, utilities, maintenance), lowers travel allowances and commuting benefits, and improves retention, reducing hiring and onboarding costs.

Companies embracing remote and hybrid models can offset rising payroll taxes while boosting employee satisfaction.

7. Automate to reduce admin costs

Automation is a game-changer for HR leaders looking to tackle the rising costs of employers' NICs.

By automating repetitive administrative tasks such as payroll processing, invoice generation and data entry, businesses can streamline operations and significantly reduce their reliance on large support teams.

While investing in automation software involves an upfront cost, the long-term savings in labour expenses, combined with increased accuracy and efficiency, make it a smart, future-focused decision.

8. Cut overheads with energy efficiency

Reducing non-payroll expenses can help offset NIC increases.

Consider energy-efficient office upgrades (LED lighting, insulation, smart heating), renewable energy solutions (solar panels, green initiatives) and government subsidies for sustainable business investments.

Sustainability doesn’t just reduce costs - it aligns with employee values and enhances your employer brand.

The time to act is now

Rising NIC costs are a challenge, but for HR leaders, they’re also an opportunity to rethink workforce strategies.

By focusing on cost efficiencies, employee satisfaction, and proactive planning, you can navigate these changes without harming talent acquisition or retention and future-proof your business.