Time strapped? Key takeaways from the blog:
- From April 2025, employer NI contributions rise to 15% (from 13.8%) with a new £5,000 threshold
- The average business faces increased costs of around £900 per employee annually
- Implementing salary sacrifice through Maji can reduce these increased NI costs by 30-60%
- Quick implementation means you can start saving before the April 2025 changes
Introduction
The National Insurance (NI) rate increase from 13.8% to 15% will come into effect as of April 2025, introducing costs that will have an impact on your bottom line. The change will increase your NI contributions by 1.2% alongside a drop in threshold to £5,000 from £9,100 which equates to an additional cost of approximately £900 per employee, per year.
For a business with 50 employees, this could result in an extra £45,000 in annual costs, which can seem daunting, but there are alternatives – you can transform your NI costs into an opportunity to save money and support your employees.
The National Insurance increase: In detail
According to the Institute for Fiscal Studies, the impact of the NI increase tends to vary dependent on employee income levels:
- For minimum wage workers (around £22,000), employers face an additional £770 in NI contributions
- For median earners (around £33,000), the increase is approximately £900
- For middle-income workers (£35,000), employers will pay roughly £950
This could potentially mean some challenging adjustments. The British Chamber of Commerce reports that 55% of companies plan to increase pricing to manage these costs, while others may reduce working hours or limit new hires. This fits with the slowing rate of job creation and the reality that vacancies have reached their lowest level since May 2021.
However, there is an alternative. It is possible to turn these higher NI costs into business savings using salary sacrifice schemes. These arrangements offer you a proven way to reduce your NI liability while offering valuable benefits to your employees.
The Maji platform has been designed to simplify this process while helping you see the benefits. It allows you to experience:
Direct cost savings:
When an employee sacrifices part of their salary, this reduces their gross salary before tax and NI insurance are calculated. You then pay 15% only on the reduced salary amount, not on the original salary.
For example, if an employee earning £35,000 sacrifices £3,500 into their pension, your NI savings are £525 (15% of £3,500) pa and your employee’s savings are £280 (assuming they are a lower rate tax payer) and the employee’s pension receives the full £3,500, meaning you both save money. When you multiply this across your workforce, the savings become substantial.
Improved employee benefits:
Employees keep more of their earnings through reduced NI contributions, and they get access to cost-effective benefits that include: electric vehicles, currently there is a 40% saving on lease costs; childcare schemes that reduce costs by up to 47%; and technology and cycle-to-work schemes.
Simplified administration:
Through Maji employees can access all your salary sacrifice arrangements from a central platform that also offers built-in compliance checks and reporting; real-time tracking of savings for both you and your employees; and a nice reduction in manual processing and HR workloads.
Investing in these options gives you the opportunity to deepen your financial management and savings without compromising on your employee’s financial well-being. And for your employees this change in approach gives them the opportunity to strategically plan their finances and enjoy long-term savings.
Making the most of change
The NI increase has the potential to be a catalyst for your business and how you approach employee benefits and financial wellbeing. While the immediate cost savings are compelling, if you implement a well-designed salary sacrifice scheme now, it can create lasting value by building financial resilience and delivering long-term business benefits.
You are actively creating a culture where financial wellbeing is prioritised and supported because you’re helping your employees optimise their pension contributions and develop sustainable financial habits. You are also turning a mandatory cost increase into ongoing savings which strengthens your employee value proposition and helps you build a benefits framework that can adapt to future regulatory changes.
Financial wellbeing isn’t just about managing costs. With Maji, it’s about creating an environment where you and your employees thrive.
