National Insurance Changes Are Front-Page News – And a Front-Line Issue for Employers

What’s behind the headlines?

The policy has been framed as part of a broader effort to stabilise public finances, but it’s already being felt as a financial burden by businesses across the UK.

The Guardian recently reported that the hospitality sector views this as a “bitter blow” at a time when businesses are already struggling with wage inflation, energy costs, and staff shortages.

The British Retail Consortium warned that two-thirds of major retailers are considering raising prices, reducing staff hours, or cutting headcount altogether.

And The Times highlighted that many employers are already preparing to pass these increased costs on to working families through higher prices.

This isn’t a quiet policy tweak. It’s a significant cost hike, and it’s happening now.

Real impact, real fast

Let’s be clear – this isn’t a hypothetical exercise. The costs are very real. For example:

A team of 15 employees earning £32,000 each will now cost a business an additional £13,347 per year in Employer National Insurance Contributions alone.

This is based on a straightforward calculation:

Under the old rules: (£32,000 - £9,100) × 13.8% = £3,159.80 per employee

Under the new rules: (£32,000 - £5,000) × 15% = £4,050 per employee

The difference per employee is £890.20, multiplied by 15 = £13,353

That’s over thirteen thousand pounds – just to keep the same team doing the same work.

A wider shift in employer thinking

Rising ERNI costs are part of a much broader trend. Employing staff in the UK now comes with a growing list of obligations and financial pressures:

• Employer’s National Insurance

• Workplace pensions

• Rising minimum wages

• Statutory leave, sick pay, training expectations

• Compliance and safeguarding requirements

These are all important, but they do add up. For employers navigating a post-pandemic economy and uncertain global markets, the cumulative cost is forcing a rethink.

Increasingly, business leaders are asking:

Which roles must be delivered onshore?

Are there more efficient ways to structure teams?

Could remote or global workers help us reduce costs while maintaining service levels?

Exploring new staffing models

Some employers are exploring automation. Others are revisiting their use of contractors or hybrid models. A growing number are looking at offshore staffing – not outsourcing in the traditional sense, but creating integrated remote teams that deliver the same output, in UK working hours, at significantly lower cost.

This model avoids UK employment costs such as ERNI entirely, offering a new level of flexibility. And with modern technology, it’s easier than ever to manage and collaborate with global colleagues.

Importantly, many businesses are not replacing UK staff, but freeing up budget to hire more strategically and remain competitive.

So what now?

The increase in Employer National Insurance is not an isolated issue. It’s part of a shift that’s making traditional employment models harder to sustain – especially for small and medium-sized enterprises.

Businesses that take a proactive approach now – rethinking how and where their teams are built – will be far better placed to weather future economic pressures and seize new opportunities.

If you’re exploring ways to adapt your workforce strategy, now’s the time to gather information, review your options, and make informed decisions.

We’ll be sharing further insights and tools over the coming weeks to help employers model the cost implications and explore alternative approaches.