New NICs Thresholds 2025: How Employers Can Reduce Payroll Costs

New NICs Thresholds Explained: The Smart Way to Reduce Payroll Costs

Keeping payroll costs under control is a top priority for businesses, and the National Insurance Contribution (NICs) threshold changes in April 2025 could significantly impact employer costs. However, these changes also present opportunities to optimise workforce strategies and reduce payroll liabilities.

At Allstaff, we help businesses navigate recruitment challenges while keeping workforce costs manageable. In this article, we’ll break down the NICs threshold updates, their impact on payroll, and the best strategies to reduce costs while maintaining business efficiency.

What Are the National Insurance Contribution (NICs) Changes for Employers in 2025?

Starting from April 6, 2025, employers will face new NICs thresholds and rates. Here’s what’s changing:

Key Changes to NICs Thresholds & Employer Costs

NICs Category	Current Threshold (2024/25)	New Threshold (April 2025)	Impact on Employers
Secondary Threshold (Employer NICs Start Point)	£9,100 per year	Expected reduction (TBC by the Government)	Employers may pay NICs on more earnings
Employer NICs Rate	13.8%	Increasing to 15%	Higher payroll costs per employee
Employment Allowance	£5,000 per year	Increasing to £10,500	More businesses can claim NICs relief

What this means for businesses:

• Employers will pay NICs on a larger portion of employees’ earnings due to a lower secondary threshold.
• The NICs rate increase from 8% to 15% means higher payroll tax per employee.
• The Employment Allowance increase (from £5,000 to £10,500) helps small businesses offset these costs.

Note: The government’s final confirmation of these changes will be announced in the upcoming budget.

How Will NICs Changes Affect Payroll Budgets?

According to the Office for Budget Responsibility (OBR), these NICs changes are expected to increase payroll costs by 2% across UK businesses.

Potential Impacts on Employers:

Higher employer NICs liabilities – reducing profit margins.

Increased employment costs, especially for businesses with high staff numbers.

Cash flow challenges – requiring businesses to adjust payroll budgets.

Potential salary freezes – limiting wage growth due to higher payroll taxes.

Changes in recruitment trends – employers may favour temporary staff, apprentices, and self-employed workers to control costs.

Example:

A business with 10 full-time employees earning £25,000 annually could see an annual NICs increase of £8,058 under the new rates:

Scenario	Current (2024/25)	From April 2025
Employer NICs Threshold	£9,100	£5,000
NI-Affected Salary	£15,900	£20,000
Employer NICs Rate	13.8%	15%
Total Employer NICs per Employee	£2,194.20	£3,000
Total Employer NICs for 10 Employees	£21,942	£30,000

 

Strategies to Reduce Payroll Costs in 2025

The NICs increase is unavoidable, but smart workforce strategies can help mitigate rising payroll costs while maintaining productivity.

1. Maximise the Employment Allowance (£10,500 Relief)

The Employment Allowance allows eligible businesses to reduce their NICs liability by up to

£10,500 per year starting in April 2025.

Who Qualifies?

Businesses with a total NICs bill under £100,000 last year. Employers not involved in tax avoidance schemes.

• How to Claim:

Apply via HMRC’s payroll software (Sage, Xero, QuickBooks). Submit the claim through PAYE as part of your payroll process. Receive a NICs reduction of up to £10,500 per year.

2. Use Salary Sacrifice to Lower NICs Liabilities

What is salary sacrifice?

Salary sacrifice schemes allow employees to exchange part of their salary for non-cash benefits, reducing taxable income and employer NICs obligations.

Popular Salary Sacrifice Benefits:

Pension salary exchange – employer pays into a pension, reducing taxable earnings.

Cycle-to-work scheme – lowers taxable salary & NICs.

Electric vehicle scheme – tax-efficient car leasing.

Additional pension contributions – boost retirement savings while lowering NICs.

3. Optimise Workforce Planning & Consider Temporary Staffing

Many businesses are turning to temporary or contract staffing to reduce long-term NICs liabilities while maintaining flexibility.

Why use temporary staffing?

Employers only pay NICs for hours worked – avoiding long-term tax obligations.

Adapts to seasonal fluctuations – reducing payroll expenses.

No redundancy costs – businesses can scale up or down as needed.

Allstaff specialises in placing high-quality temporary staff to help businesses control payroll costs.

4. Hire Apprentices & Veterans to Reduce NICs Costs

Apprentices: Employers do not pay NICs for apprentices under 25 – making apprenticeships a cost-effective hiring solution.

Veteran Hiring Relief: Employers can avoid NICs for the first 12 months when hiring military veterans.

How Allstaff Can Help You Navigate NICs Changes

At Allstaff, we provide expert recruitment solutions to help businesses adapt to payroll changes, reduce staffing costs, and stay competitive.

We specialise in:

Temporary & contract staffing solutions to reduce NICs liability.

Flexible workforce planning to optimize costs.

Recruitment for key industries including manufacturing, logistics, engineering, office support, HR, marketing, accountancy, and finance.

Want to reduce payroll costs?

Contact Allstaff today for a free consultation on cost-effective hiring strategies for 2025.