With Employer National Insurance Contributions (NICs) rising from 13.8% to 15% in April 2025 and the secondary threshold dropping from £9,100 to £5,000, businesses—especially in hospitality and retail—must act now to manage the additional costs. Here’s how to reduce your NIC liability and protect your bottom line.
Maximise the Employment Allowance
The Employment Allowance is increasing from £5,000 to £10,500, providing relief for smaller businesses by reducing NIC liabilities. If you’re eligible, make sure you claim this allowance to offset the increased costs.
Who can claim? Businesses with NI bills below £100,000 per year
How to claim? Through your payroll software or HMRC portal
Implement Salary Sacrifice Schemes
Salary sacrifice allows employees to exchange part of their salary for non-cash benefits, reducing taxable earnings and lowering both employer and employee NIC contributions.
Examples of Salary Sacrifice Benefits:
Pension contributions – Encouraging employees to contribute more to their pension reduces taxable pay.
Cycle-to-work schemes – Employees save on commuting costs while you save on NIC.
Electric car schemes – Lower tax rates on salary sacrifice for green vehicles.
Why it works: NIC is calculated on the reduced salary, meaning both employers and employees pay less.
Restructure Workforce Planning
Optimising staff hours and contracts can help businesses remain efficient while minimising NIC costs.
Utilise part-time & seasonal staff – Splitting full-time roles into part-time ones may keep some employees below the NIC threshold.
Hire under-21s – Employers don’t pay NIC on employees under 21, making younger staff a cost-saving option.
Review shift patterns – Adjusting rosters to ensure efficient staff coverage can reduce unnecessary payroll expenses.
Offer Non-Monetary Perks Instead of Pay Rises
Instead of salary increases, consider alternative benefits that improve job satisfaction without adding to NIC liabilities.
Examples of Low-Cost, Tax-Efficient Perks:
Staff meals & discounts – Non-cash perks that employees value.
Wellness & mental health programs – Keeps staff engaged and reduces turnover.
Professional development opportunities – Upskilling staff boosts retention and business performance.
Why it works: These perks enhance employee satisfaction without increasing taxable salary.
Reduce Overheads & Improve Efficiency
Hospitality businesses can offset rising payroll costs by cutting waste, renegotiating supplier contracts, and improving efficiency.
Audit your stock – Eliminating waste and reducing over-ordering can significantly improve profit margins.
Switch to energy-efficient systems – Lowering utility costs can help balance higher wage bills.
Invest in automation – Digital ordering, self-service kiosks, and remote temperature monitoring reduce reliance on extra staff.
Claim Tax Reliefs & Government Incentives
Check if your business qualifies for:
R&D Tax Credits – If you’re improving processes or technology, you may get tax relief. According to Rouse Partners “Regular activities such as researching a new dish, a new menu or a new concept could qualify, and HMRC is seeking to reward this type of innovation through R&D tax credits.”
Business Rate Relief – Many hospitality businesses qualify for rate reductions.
Green Energy Grants – Funding for energy-efficient improvements can help cut costs.
Final Thoughts
The NIC increase in April 2025 will have a significant financial impact on hospitality businesses. However, by planning ahead, restructuring payroll, leveraging tax reliefs, and optimising operations, businesses can mitigate the extra costs and maintain profitability.
Need help navigating these changes? Let’s discuss strategies to protect your business.
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