Employer National Insurance Contributions
The recent increase in Employer National Insurance Contributions (NICs) is putting thousands of UK companies under additional financial strain.
If you’re a business owner or director who can’t afford the rising cost of NICs, you’re not alone — and there are practical, legal options available.
In this guide, we’ll explain what’s changed, how it impacts your business, and the realistic steps you can take to manage rising employment costs.
What Has Changed with Employer NICs in 2025?
From 6 April 2025, the UK government increased Employer NICs from 13.8% to 15%. At the same time, the secondary threshold — the point at which employer NICs become payable — has been lowered from £9,100 to £5,000 per employee.
This means:
- Employers pay more NICs on each employee
- More of your payroll is now subject to NICs
- Businesses with even modest wage bills face significant increases
For example, a company with a £1 million annual payroll now faces around £25,000 in extra NIC liability per year.
Why Can’t Some Companies Afford the NIC Increase?
Rising employment costs are hitting businesses that are already struggling with:
- Reduced demand or cashflow issues
- Increased energy bills and supplier prices
- Brexit-related trade complications
- Staff shortages or retention problems
If your company is already in financial distress, this additional tax burden could tip it into insolvency.
That’s why it’s crucial to take early, strategic action.
5 Practical Ways to Manage the NIC Burden
1. Implement Salary Sacrifice Schemes
Salary sacrifice allows employees to exchange part of their salary for benefits like:
- Extra pension contributions
- Cycle to work schemes
- Childcare vouchers
This reduces both employer and employee NICs and can be a win-win if structured properly.
2. Claim the Employment Allowance
The board formally resolves to begin the liquidation process and instructs the IP to prepare the necessary paperwork.
The IP begins drafting the Statement of Affairs and related documents.
3. Review Workforce Composition
Consider whether your current staffing model is sustainable:
- Could part-time roles or contractors offer more flexibility?
- Are there tasks that can be outsourced cost-effectively?
- Is your team structure aligned with current business needs?
This is not about redundancy as a first resort — it’s about ensuring your labour model is fit for purpose.
4. Optimise Operational Costs
Before making staffing cuts, look elsewhere for savings:
- Negotiate supplier contracts
- Review software subscriptions
- Cut non-essential expenses
Sometimes small adjustments across multiple cost centres can free up the cash needed to meet payroll obligations.
5. Appointment of Liquidator (Day 14)
If your cashflow problems run deeper than NICs, you may need to explore formal restructuring or insolvency solutions. This could include:
- Time to Pay arrangement with HMRC
- Company Voluntary Arrangement (CVA)
Can I Delay or Stop Paying Employer NICs?
Unfortunately, no. Employer NICs are a legal obligation, and non-payment can trigger penalties, surcharges, and legal action by HMRC.
However, Time to Pay agreements can offer short-term breathing space if you’re temporarily struggling.
What If I Can’t Afford to Keep Staff On?
Letting go of staff is a last resort, but if your business cannot sustain its current wage bill, you may need to:
- Consider redundancy (ensure it’s done legally)
- Review business viability and seek insolvency advice
It’s important to act responsibly as a director. Trading while insolvent or making preferential payments can lead to personal liability.
What are a director’s responsibilities when a company is in financial trouble?
Final Thoughts: Don’t Let the NIC Increase Be the Final Straw
If your company can’t afford the rise in Employer NICs, you must act quickly.
There are legal, ethical strategies to reduce costs and restructure your business — and you don’t have to navigate this alone.
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