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It’s been almost two weeks since the Autumn Budget, and the bombshell news for employers on Employer National Insurance Contributions (NIC) rates is now sinking in. Not only did the Chancellor increase the rate from 13.8% to 15%, she also confirmed the minimum threshold for applying this tax will reduce from £9,100 to £5,000 pa.
The Institute for Fiscal Studies says the increases in employer National Insurance means that employers will have to pay an additional £900 for each employee on median average earnings (around £33,000 pa).
Businesses are now scratching their heads on how to accommodate these increased costs. Restricting future salary increases, curbing recruitment and passing the costs onto its clients are all options which have been mentioned in the media, but each of those options seem unfair to employees or customers.
But one option available to employers to mitigate some of these costs is Salary Sacrifice. Salary Sacrifice, sometimes referred to as Salary Exchange has been around since the 90s, but we still find many employers who aren’t using this incredibly tax efficient way of deducting your employees’ pension contributions. Not only can it reduce the Employer’s NIC bill (and that saving is more significant now the rate is going up) but it can also help the higher earners in the business with their tax planning.
Some are put off by the thought of perceived additional administration for their payroll, or the disruption to the business as you go through this change. However, if implemented correctly by an expert, you shouldn’t see any additional administration and it can lead to a more engaged workforce and higher employee contributions. Which in turn leads to even higher Employer NIC savings.
Wren Sterling has been advising businesses of all shapes and sizes for many years in the area of Salary Sacrifice; the different ways you can roll this out along with providing a comprehensive communication program for your employees, so they understand what this is, and its benefits. In fact, since the Budget, Wren Sterling has seen an increase in the number of companies actively seeking advice from us on this topic.
If you don’t operate Salary Sacrifice, and are now tempted to consider this, please get in touch with Wren Sterling.
We can help you mitigate those increased NIC costs and implement a scheme that could save your employees money too.
References to employer national insurance contributions are based on our current understanding of the changes taking place in April 2025. Tax laws are subject to change.
