How to keep in control past April’s hikes
Late in 2024, the UK Government presented its latest Autumn Budget.
There was a lot to process.
This article will talk about one big announcement made then.
It’s one employers need to be aware of.
That’s the changes to National Insurance.
From April 6th, 2025, the secondary threshold will be almost halved.
It currently stands at £9,100 but will soon fall to £5,000.
That means any employee earning at least that much will trigger Class 1 NICs.
The rate of NICs is also increasing from 13.8% to 15%.
On the face of it, this could mean increased staffing costs.
However, changes to the Employment Allowance may offset that for small businesses.
The Employment Allowance allows certain employers to reduce their liability for NICs and is more than doubling, from £5,000 to £10,500.
Overall, payroll costs are expected to rise by 2%.
So whether these measures help or hinder your business, you may be looking for ways to reduce costs elsewhere.
This article will look at 5 ways you can keep your overall costs down even as NICs rise.
Understand your financial position
The first and most important step is to ensure you have a clear understanding of your business’s financial wellbeing. It’s easy for owners and managers to lose sight of the big picture when they are rushing around firefighting on a daily basis.
Sometimes, taking a step back to assess your company’s overall health is essential.
That activity alone might help you spot expenditure you no longer need, like unused software or subscriptions.
It’s also a great opportunity to assess the return on investment (ROI) of your marketing efforts and identify cash flow issues before they cause problems.
Make use of outsourcing and freelancers
Outsourcing certain aspects of your business, such as HR or payroll, often makes financial sense. You have fewer people on your payroll and get access to specialist skills without the need to hire and train them.
Of course, you pay for the convenience—it has to make financial sense for the company you outsource to as well—but it is often a better solution for managers who might otherwise waste money through poor hiring decisions or rushed training.
Freelancers are another way to get the skills your business needs without having to bring someone into your company. That can pose its own difficulties, but at least you don’t need to worry about paying NICs for them!
Consider benefits like working from home and salary sacrifice
There are ways of working that could increase employee satisfaction and engagement while also saving you money. While allowing employees to work from home might sound daunting to a (micro-)manager, doing so might allow you to downsize your premises and save on rent.
Meanwhile, salary sacrifice schemes lower employees’ salaries in exchange for pension contributions or other pre-tax benefits. This in turn could lower your NIC bill.
Ask employees for suggestions
It is always worthwhile to check in with your employees, and we’ll recommend it again here. As the ones on the front line of your business, they are often best placed to identify inefficient processes, sources of waste, or unusable tools.
Take suggestions for ways to enhance your efficiency and streamline costs and you might be surprised with the suggestions you come up with.
Be sure to acknowledge all suggestions, good and bad, to ensure your employees feel listened to. And if they do come up with some ideas that you can implement to cut costs, reward those with the best suggestions.
Resist the temptation to cut jobs
Finally, most experts advise against staff cuts. Your business will need the capacity to recover and grow from this and any future bumps in the road, but there are plenty of other places to look first before taking entire jobs off the wage bill.
There could also be adverse effects on morale and productivity if jobs are cut or wages frozen or reduced.
Consider this only as a last resort. Hopefully the tips above will help you to make positive changes to emerge in great shape in the new financial year.