Retain first and recruit later as higher employer costs loom

Spare a thought for payroll personnel as we move swiftly towards a new fiscal year. Businesses big and small are well accustomed to the arrival of April and with it, dates and deadlines and an extra focus on finances.

Yet April 2025 adds an extra dimension of pressure in the form of rate rises – specifically the long-anticipated increase to employer National Insurance contributions (NIC).

Employer NIC is changing on two fronts: from April 6 the contribution rate will increase from 13.8% to 15%, while the secondary threshold at which employers start paying tax on each employee’s salary will be brought down from £9,100 a year to £5,000.

Government has pulled this lever to help fill the £22 billion ‘hole’ in the UK’s public finances, given NIC is among the largest revenue streams, second only to income tax, while aligning with Labour’s manifesto pledge to avoid increasing taxes for working people.

At least that’s the rationale, yet the reality for business is now coming into sharp focus, as employers look beyond April and how the expected rises will impact not only the bottom line, but also the differential impact to business and its ability to recruit and retain.

Initial UK-wide research into the oncoming NIC changes indicate employers may be left to choose between one or the other. Global Payroll Association found that 26% of small and medium-sized enterprise owners warned they may need to reduce headcount as a result, while one in five (21%) indicated they are now more inclined to refocus salary sacrifice arrangements and pension contributions while potentially pushing recruitment ambitions onto the long finger.

Come April, running a business will become that bit more expensive, impacting upon hiring plans, staffing hours, and inevitably leading to a spike in redundancies. Support for small businesses will also come in the form of the employment allowance more than doubling from £5,000 to £10,500, while the £100,000 cap is being taken away to ease pressure.

Yet the mood music in Northern Ireland chimes with apprehension. Already NI Chamber’s member research has found around 75% of respondents were either highly or very concerned about April’s increase to employer NICs, and nine out of 10 admitted they are now under pressure to put up prices due to rising labour costs.

Public services must be stabilised, but doing so in this manner, at the expense of business profit margins, will inevitably blunt innovation and investment.

Not when you have the Northern Ireland Council for Voluntary Action warning that 76% of third sector organisations expect major financial implications come April, which will have a knock-on effect on service provision and ‘threaten the very sustainability’ of the voluntary sector locally.

Government must heed such stark warnings and consider ways to support those businesses unable to absorb the increased cost of NICs that goes above and beyond eases to employment allowance.

Especially considering that not every business will share the burden equally. Across the UK, different industries tend to be concentrated in any one region, with Northern Ireland boasting strong representation across agriculture, construction, finance, hospitality, services and tourism, to name but a few.

Together they make up our local business sphere which, if it falls in a higher payroll model, means Northern Ireland’s economy is more likely to be disproportionately affected than other regions of the UK.

The turn of the fiscal year should not be marked by employers entering mitigation mode. Particularly after long post-pandemic years of a high-inflation environment defined by higher supply costs, operational challenges and a persistent shortage of skills.

Add to this Northern Ireland’s stubbornly high rate of economic inactivity, which at 246,000 people, continues to find itself in the unenviable position at the top of the UK and Ireland charts, and you have a business environment that is crying out for long-term investment into skills and development.

Investment that will be harder to come by once April arrives, when businesses will again be forced to compromise on their plans for growth. Growth that includes the human capital – the people – central to all corporate success.

Sustainable growth requires commitment in the face of challenge and uncertainty, and a timely injection of confidence from policy-makers and the wider Stormont Executive so that profits, competitiveness, investment and growth can all rise together on an even keel.

• Claire Aiken is managing director at Aiken PR