From 6 April 2025, the employer national insurance contribution (NIC) rise from 13.8% to 15% lands alongside a cut in the secondary threshold – the point at which employers start paying Class 1 NIC – from £9,100 to £5,000 a year. For many payrolls, that is a double hit. Margins are already tight and wage pressures have not gone away: regular pay growth across the private sector ran at 5.1% in the February to April 2025 period (ONS, June 2025), and vacancies, while falling, still totalled 718,000 in May to July 2025 (ONS, August 2025). Those two figures tell a clear story – staffing costs remain a major line on the profit and loss (P&L) statement.
This blog sets out what is changing, what it means for typical salaries and five practical steps you can take now to reduce the impact without cutting headcount or service levels. We keep jargon to a minimum and focus on quick wins such as salary-sacrifice electric vehicle (EV) schemes and smarter use of allowances. If you would like help modelling the impact for your business, you can talk to us at John Potter & Harrison – we’ll run the numbers and give you a plan.
Employer NIC rise – what changes in April 2025
Two changes take effect for 2025/26.
- Main rate: Employers pay 15% (was 13.8%) on earnings above the secondary threshold. The change applies UK-wide and across standard NIC categories, with existing age-related and special-category reliefs continuing to apply where relevant (HMRC, 2025).
- Secondary threshold: Employers start paying NIC at £5,000 a year (£417 a month, £96 a week), down from £9,100 a year in 2024/25.
What is the net cost change?
A worked example for a £30,000 salary helps show the combined effect of the higher rate and the lower threshold.
- 2024/25 position: Secondary threshold is £9,100. Employer NIC base is £30,000 – £9,100 = £20,900. NIC at 13.8% = £2,884.20.
- 2025/26 position: Secondary threshold is £5,000. Employer NIC base is £30,000 – £5,000 = £25,000. NIC at 15% = £3,750.00.
- Net change: £865.80 more NIC for that employee in 2025/26.
If you claim employment allowance, remember it is per employer, not per employee. It reduces your overall employer NIC bill up to the annual cap before you pay the balance. Use it strategically – see point 3 below.
Five ways to soften the April hit
1) Salary sacrifice EV schemes – cut NIC and offer a valued perk
Salary sacrifice replaces part of cash pay with an electric car lease. Because the sacrifice happens before tax and NIC, you save 15% employer NIC on the sacrificed amount, while the employee pays low benefit in ind (BiK). For zero-emission cars, the BiK rate is 3% for 2025/26, rising gradually in later years, which keeps the overall cost attractive compared with petrol or diesel.
- Why it helps: Employer NIC is saved on every pound of sacrifice, improved retention and greener fleet policy.
- Good practice: Use a compliant provider, update your policies and communicate take-home changes clearly.
2) Wider salary sacrifice – pensions, cycle-to-work, holiday purchase
Beyond EVs, approved salary-sacrifice arrangements can swap taxable pay for benefits with lower or no NIC impact.
- Pensions: Employer contributions via sacrifice reduce employer NIC on the exchanged pay.
- Cycle-to-work: Still popular and straightforward.
- Holiday purchase: Where feasible, gives flexibility and a small NIC saving.
- Why it helps: Direct, recurring NIC savings and a benefits package that supports wellbeing and retention.
3) Employment allowance – claim early and plan its use
The allowance for 2025/26 is £10,500 for eligible employers. That can absorb a significant slice of your employer NIC across the year, especially for smaller payrolls.
- Actions: Confirm eligibility (including connected companies and de minimis state-aid rules where relevant), claim via payroll and forecast when the allowance will be exhausted so you can plan cashflow.
- Tip: If you have seasonal peaks, the earlier months’ NIC can be covered by the allowance, smoothing the cost as the 15% rate bites.
4) Use age-related NIC reliefs and apprenticeships where appropriate
Employer NIC is 0% up to the relevant upper secondary thresholds for certain groups – for example, employees under 21 and apprentices under 25, with standard rates above those limits. Aligning entry-level hiring and training plans with these reliefs can lower average NIC costs while building future skills.
- Actions: Map roles that suit apprenticeships, check the apprenticeship levy position if applicable and update workforce plans ahead of September intakes.
- Guardrails: Hire based on business need and role fit – reliefs should support, not drive, decisions.
5) Reshape reward – smarter bonuses and benefits
One-off cash bonuses attract employer NIC in full. Consider a mix of the following.
- Profit-sharing via tax-efficient benefits: Where appropriate, use approved share plans or bonuses alongside salary-sacrifice options.
- Non-cash benefits with favourable NIC treatment: For example, one mobile phone per employee provided by the employer, staff events within HMRC limits and trivial benefits within the £50 rule.
- Overtime and scheduling: Avoid unnecessary spikes that do not add value.
- Why it helps: Keeps total reward competitive while trimming avoidable NIC leakage.
Implementation checklist
Getting ready for April does not need to be hard. Work through the following with your adviser.
- Modelling: Build a per-employee and per-department NIC impact model at 15% with the £5,000 threshold so you can prioritise actions.
- Benefits policy: Add or refresh salary-sacrifice terms.
- Car policy: Prioritise zero-emission options.
- Payroll calendar: Plan when employment allowance will be used up.
- Contracts and letters: Update for any sacrifice changes.
- Payroll software: Check 2025/26 rates and thresholds are applied and emplyment allowance is claimed correctly.
- Communication with managers: Brief on cost drivers and choices.
- Employees: Clear, plain English guides for any scheme launches.
If you would like templates, checklists and hands-on support, get in touch with us – we can handle the setup and training for your team.
What this means for your business
The employer NIC rise to 15% and the lower threshold will increase the cost of employing staff in 2025/26. The impact is uneven: businesses with many part-time or lower-paid roles feel the threshold cut more, while those with higher pay bands notice the rate hike most. Against a backdrop of persistent wage growth and a cooler but still active labour market – private-sector regular pay growth 5.1% and 718,000 vacancies – it makes sense to act early. A combination of EV salary sacrifice, wider sacrifice on pensions and approved benefits, timely use of employment allowance and sensible workforce planning can meaningfully reduce the bill while supporting retention and recruitment.
We can help you assess the numbers, select the right measures for your setup and put them in place without fuss. Speak to us for a tailored plan and a clean implementation. If you are unsure where to start, send us your latest payroll and we will show you where the biggest savings sit. The employer NIC rise is real, but with the right steps you can soften the impact and protect cashflow.
