In April, changes to Employer National Insurance Contributions (NICs) came into effect, adding significant wage cost pressures to businesses across the UK. The rate of Employer National Insurance Contributions has risen to 15%, and the threshold at which employers must start contributing has dropped from £9,100 to £5,000.
Changes to Employer National Insurance mean that employers must now pay more National Insurance for each eligible employee, regardless of whether revenue has increased to match. For many small and medium-sized businesses, this added expense is adding significant strain at an already challenging time. If you are finding it difficult to absorb these costs, there are fortunately some steps you can take to ease the pressure which we have outlined in this article.
Check If You Are Eligible For The Employment Allowance
If you are struggling with increased Employer National Insurance Contributions, the first thing you should do is check if you are eligible for any support. It is important to note that NICs are a legal obligation and cannot be deferred without penalty (unless agreed through a Time To Pay arrangement with HMRC)/ However, the Employment Allowance could offer some relief. This allows eligible employers to reduce their annual NICs bill by up to £10,500, so check the criteria and apply if you think you could benefit.
Consider Salary Sacrifice Schemes
Salary sacrifice arrangements can also help you to manage your National Insurance Contributions while still supporting your employees. These kinds of schemes require staff to give up part of their salary in exchange for non-cash benefits, such as pension contributions, cycle-to-work schemes, or vouchers. As staff salaries are reduced, so too are the NICs payable by you. Not only can this ease your overall wage cost burden, but it can also help you to offer attractive perks and retain your workforce.
Restructure Your Workforce
In some cases, the increase in Employer National Insurance Contributions may require you to consider some level of organisational restructuring to reduce costs. This process doesn’t have to immediately mean redundancies; start by reviewing roles and responsibilities and see if some level of redefinition of job roles or adjustments to shift patterns could improve overall efficiency.
That said, if your business is really struggling, you may need to consider redundancies or explore alternative employment models. Upping your usage of self-employed contractors or outsourcing certain functions could significantly lower Employer NICs. However, these kinds of changes are particularly sensitive and need to be approached with care to reduce the likelihood of fallout. You should always consult the right professionals before making any decisions.
Review Other Operational Costs
It’s also worth taking a fresh look at your wider operational costs, especially if it has been a while since you did so. From utility bills to supplier agreements, there are almost always savings to be found. Even small changes across many areas of cost can add up to a meaningful reduction in overheads, helping you to offset the impact of higher NICs.
Get Expert Advice
Lastly, do not underestimate the importance of an outside perspective. If rising Employer National Insurance Contributions are pushing your business into dangerous financial territory, seek expert advice as soon as possible. A licensed insolvency practitioner or business recovery expert can help you to explore all of your options, from cash flow management to formal insolvency procedures if necessary. In some cases, liquidation may be the right path, but in many others, taking proactive steps can help you to regain financial stability before reaching that point.
At Ballard Business Recovery, our business rescue experts are on hand to help you face increased costs with confidence. If you are concerned about your business’s ability to pay increased Employer NCIs, do not hesitate to get in touch with us and we can help you put in place a suitable plan for moving forward.
