National Insurance Rise: Should You Consider Reviewing Your Benefits Package?

The National Insurance (NI) rise taking effect in April 2025 has left many UK businesses facing tough decisions. Employers’ NI contributions will increase from 13.8% to 15%, while the threshold for contributions will drop from £9,100 to £5,000.

These changes present significant challenges for businesses, especially SMEs, which often operate with tighter budgets. This shift also offers a chance to reimagine your approach to employee benefits, creating solutions that offer both financial efficiencies and meaningful support to your workforce. By adapting your benefits package, you can ease the impact of the rise, boost employee satisfaction, and maintain workplace morale.

This guide will outline what the NI rise means, why it’s crucial to remain competitive in your benefits offering, and actionable strategies to enhance your package. Links to additional Terryberry resources are included to provide further insights into creating a thriving workplace culture.

The Impact of the National Insurance Rise on Your Business

For businesses, the rise in NI contributions means an increase in payroll overheads. A reduction in the employer threshold only adds to the burden, impacting profitability. Unsurprisingly, many companies expect to offset costs by scaling back on pay increases, cutting expenses, or even pausing hiring plans.

Looking deeper into analysis by Sage, the key to surviving these turbulent times lies in thinking strategically. Employers must find ways to balance budget constraints with a commitment to supporting employees. Failing to act could lead to disengaged teams and increased staff turnover at a time when retaining talent is already a challenge.

Why It’s Important to Keep Your Benefits Package Competitive

Boosting Retention and Recruitment

Maintaining a competitive benefits package is essential for attracting and retaining talent. Employees are increasingly prioritising benefits such as wellbeing programmes, personalised perks, and flexible working arrangements in their decision to stay with or join a company.

For actionable strategies on how employee recognition impacts retention, we recommend reading ‘How Employee Recognition Can Increase Retention’.

Enhancing Engagement and Wellbeing

A carefully designed benefits package not only helps offset direct financial impacts like the NI rise but also creates an environment where employees feel supported. Perks like mental health programmes or flexible work options send a message that your business truly values its people. For more inspiration, see Terryberry’s insights into Employee Engagement Strategies.

Enhancing Your Benefits Package to Offset the NI Rise

To counter the effects of increased NI contributions, consider introducing benefits that are both cost-efficient and impactful. These could include tax-efficient options to relieve financial strain or programmes that focus on holistic employee wellbeing.

Salary Sacrifice Schemes

Salary sacrifice schemes are one of the most effective ways to provide high-value, tax-efficient benefits. Through these arrangements, employees give up part of their pre-tax salary in exchange for perks like:

Cycle-to-Work Schemes: Encouraging greener commuting habits while promoting physical health.
Electric Vehicle (EV) Leasing: A growing option for promoting sustainability while saving costs on fuel and maintenance. For a full breakdown, check out this detailed guide on Salary Sacrifice Benefits.
Pension Contributions: Allowing employees to save for their future in a tax-efficient way.

These programmes not only reduce taxable income for employees but also lower NI liabilities for your business, so they’re a great way to help employers mitigate the increasing costs.

Flexible Time Off and Leave Options

The ability to offer flexible leave is increasingly appreciated by employees. A popular example is holiday purchase schemes, which allow staff to buy additional annual leave days. This perk supports work-life balance without requiring large upfront investment from employers.

Implementing additional paid leave or wellness days is another way to demonstrate your commitment to fostering a positive workplace culture. Learn about how recognition and flexibility feed into stronger organisational success in Terryberry’s blog on Recognition Strategies.

Tax-Efficient Benefits

Beyond salary sacrifice, other tax-efficient benefits can make your offering more robust:

Health and Wellbeing Programmes: These include subsidised gym memberships, health insurance, or wellbeing support.
Benefits in Kind: Certain perks like private healthcare or parking allowances can be provided tax-efficiently while delivering high value to employees.
Enhanced Pension Schemes: Offering higher employer pension contributions shows long-term commitment to the workforce.

For a full review of how employers can minimise tax liabilities while supporting their teams, refer to 10 Tax-Efficient Ways to Reward Employees.

Practical Steps for Reviewing and Optimising Your Benefits Package

Updating your benefits package doesn’t need to be overwhelming. Taking a strategic, data-driven approach can ensure changes are both meaningful and effective:

Survey Your Workforce: Start by asking employees about what matters most to them. This ensures you’re investing in changes that they’ll genuinely appreciate.
Assess Financial Impact: Weigh the costs of implementing new benefits against potential returns, such as higher satisfaction, reduced turnover, and increased productivity.
Leverage Benchmarking Insights: Compare your offerings to competitors to ensure your package remains attractive within the job market.
Communicate Clearly: Introducing a new programme is only beneficial if employees are fully aware of its value. Ensure communication around benefits is accessible and ongoing.
Tap into Recognition: A refreshed benefits initiative pairs perfectly with workplace recognition. Platforms like Terryberry’s peer recognition tools make it easy to celebrate milestones and accomplishments—keeping your team connected even through tough adjustments. Learn more about peer-to-peer recognition here.

Explore Technology for Long-term Benefits

Modern HR software solutions can help streamline benefits management, making it simpler to adapt offerings as employee needs evolve. Flexible platforms, such as Terryberry’s Be Saving hub, can house and communicate all your benefits initiatives in one accessible space.

Final Thoughts

While the rise of National Insurance presents a tangible challenge, it also opens up an opportunity to revisit how your company supports its greatest asset—its people. By introducing tax-efficient schemes, enhancing perks like additional time off, and focusing on recognition, you can craft a benefits package that both inspires and retains your team.

Adaptation and proactivity will not only ease the short-term impacts of the NI increase but also position your organisation as a forward-thinking leader in employee engagement. Refocusing on benefits and recognition creates a foundation for resilience, helping your team move forward together.

To explore more ideas about creating engaged, high-performing teams, head to Terryberry’s HR resources. Together, we can turn challenges into opportunities for growth and innovation.

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