As businesses step into 2025, the cost of employment is soaring, and rising National Insurance (NI) contributions are adding further strain.
From April 2025, employer NI contributions will increase from 13.8% to 15%, while changes to the contribution threshold will see more businesses paying out even more. Combined with National Living Wage increases, these shifts are significantly raising employment costs, forcing companies to rethink budgets, workforce planning, and employee benefits.
For small and medium-sized businesses, this financial burden can present difficult decisions – from reducing staff numbers to implementing pay freezes, or scaling back benefits. These changes could also impact employee morale and retention, making it harder to attract and keep talent in an already competitive market.
The key challenges for businesses
Higher Payroll Costs – Increased NI contributions and wage hikes mean higher employment costs, putting pressure on budgets.
Compliance & Legal Risks – Keeping up with tax and employment law changes is crucial to avoiding costly errors and disputes.
Employee Retention Struggles – Cutting benefits or delaying pay reviews may lead to low morale, decreased engagement, and higher turnover.
Turning challenges into opportunities
While these cost increases are undeniably challenging, they also offer a chance for businesses to reassess HR strategies and improve workforce efficiency. face2face HR is supporting employers through these changes with tailored, practical solutions that ensure compliance, maximise resources, and keep employees engaged.
What can businesses do?
Review Workforce Structure – Now is the time to analyse staffing levels and ensure teams are aligned with business goals. This helps businesses maximise efficiency without unnecessary financial strain.
Stay Legally Compliant – with more changes on their way under the Employment Rights Bill, employment law compliance is more important than ever. face2faceHR ensures businesses document and implement pay changes correctly, ensuring clarity and avoiding disputes.
Prioritise Employee Engagement – Transparency is key. Open communication about pay, benefits, and restructuring helps employees feel valued and informed. face2face HR offers guidance and training to help employers manage these conversations effectively.
Plan for the Future – Beyond the immediate financial impact, businesses must take a long-term approach. face2face HR helps companies with succession planning, workforce development, and future-proofing strategies to remain resilient.
The bigger picture
Yes, the rising cost of employment presents a challenge – but it doesn’t have to derail your business. By taking a strategic approach, companies can turn these pressures into an opportunity to streamline operations, strengthen employee engagement, and future-proof their workforce.
At face2face HR, we provide expert guidance and tailored solutions to help businesses navigate these changes with confidence. Whether it’s restructuring, ensuring compliance, or supporting employee retention, we’re here to help.
Kathryn Rodgers, face2faceHR
face2facehr.com, 07946 330 025