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How the NI Increase Is Impacting UK Businesses

Overview of NI Changes:

The April 2025 changes to Employers’ National Insurance Contributions (NICs) introduced a dual challenge for businesses: a higher contribution rate and a significantly lowered earnings threshold. Together, these measures have expanded the portion of employee wages subject to employer NICs, driving up payroll costs across sectors. 

 

What changed for the National Insurance in the UK? 

The Chancellor’s spring budget confirmed an increase in Class 1 National Insurance contributions, affecting the employers


  • Employer NI rose from 13.8% to 15% (April 2025) 

  • Threshold change: The secondary threshold (where employer NI kicks in) was lowered from £9,100 to £5,000 annually, significantly increasing costs for businesses employing part-time or low-wage workers. 


These changes were introduced as part of broader fiscal efforts to stabilize the UK economy, increase funding for public services, and address long-term gaps in National Insurance funding.  

 

For employers, this represents a notable increase in the cost of employing staff particularly when combined with rising inflation, wage demands, and other operating expenses. 

  The Real-World Impact on UK Businesses 

1. Increased Employer Costs 

The most direct impact has been on payroll. For every employee earning £40,000, the combined effect of the employer NI rate rising to 15% and the threshold lowering to £5,000 means businesses are now paying an additional £937.80 per employee per year. For businesses with 50 or more staff, this represents an annual cost increase of £46,890 that is a significant rise in total employment costs.Some companies have responded by freezing hiring, delaying pay rises, or shifting towards part-time or contract-based arrangements to reduce liability. 

 

2. Cash Flow and Budgeting Concerns 

Small to mid-sized businesses, in particular, are facing tighter cash flow constraints. For organisations operating on fixed contracts or annual budgets, the additional NI burden is forcing tough decisions about resource allocation, pricing strategies, and operational efficiency. 

 

3. Long-Term Strategic Shifts 

The NI increase has also prompted broader reflections among leadership teams about workforce structure, automation, and outsourcing. Some businesses are now accelerating digital transformation projects or reviewing the structure of internal teams to identify where technology or external support might reduce internal headcount pressures. 


For businesses with growing teams especially in IT, Helpdesk, or NOC operations the rising cost of retaining in-house employees is becoming harder to ignore. Here’s why: 


  1. Fixed Overheads: Salaries, NI, pensions, sick leave, holiday cover all on the employer. 

  2. Talent Shortages: Finding qualified engineers is increasingly difficult and expensive. 

  3. Operational Disruption: Staff turnover or unexpected absence creates service risks. 


According to Mosaic - a strategic finance platform that creates real-time reporting, budgeting, and planning for better business decision-making, the real cost of an in-house engineer in the UK or US is often 1.3–1.5x their base salary once all overheads are accounted for. 


As operational costs climb, driven by higher employer National Insurance contributions, wage increases, and regulatory pressures, businesses like Currys are seeking innovative ways to maintain efficiency. For CEO Alex Baldock, part of the solution lies in strategic outsourcing and automation. 


In a recent statement, Baldock highlighted Currys’ growing reliance on its Indian workforce: “We’ve already got the best part of 1,000 colleagues in India – all the usual central and IT functions that you would expect – and they do a cracking job.”  

The Bottom Line

As the cost of employing staff continues to rise—driven by higher National Insurance contributions, inflation, and growing wage expectations—businesses must take a strategic view of their workforce planning. For many, maintaining a full in-house team is no longer financially sustainable. Whether you're navigating cash flow constraints, talent shortages, or operational risks, now is the time to explore more flexible, scalable alternatives that preserve service quality without compromising your bottom line.


How Uptime Can Help: 

At Uptime Global, we offer an efficient, cost-effective staff augmentation solution that helps you bypass these employment burdens while maintaining full operational control. 


  • Save up to 69% vs in-house hires 

  • We take on recruitment, HR, salaries, holiday and sick leave 

  • You get engineers you choose, working to your SLAs, your tools, just like your internal team 

  • We have ready to go remote teams in Sri Lanka & South Africa plus if Staff Augmentation doesn’t fit your requirements, perhaps our Helpdesk options in the UK, New Zealand & USA would be a better fit. 


As an MSP, we understand that your financial and operational resilience go hand in hand. If your business is looking to streamline costs while ensuring maximum uptime and productivity, we can help with tailored IT solutions. 


Contact us today to discuss how we can help your MSP business stay agile. 

 
 
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