Understanding Changes to National Insurance for Employers in 2025

The 2024 Autumn Budget introduced changes to Employer National Insurance Contributions (ENICs) that came into effect on April 6th, 2025. These updates form part of a government strategy to boost revenue while avoiding larger tax hikes in the election manifesto.

Here’s a clear overview of what’s changed and what it means for employers:

Key Changes to Employer National Insurance

1. Employers National Insurance Increase: The secondary Class 1 National Insurance rate for employers rose from 13.8% to 15%. This means higher contributions on eligible employees, including temporary workers.
2. Reduction of the ENIC Threshold: The earnings threshold where secondary Class 1 ENICs apply dropped from £9,100 to £5,000 annually, increasing contributions per employee.
3. Employment Allowance: Relief increased from £5,000 to £10,500 in total, with lifted restrictions for those previously exceeding a £100,000 ENIC bill. This remains particularly beneficial for small employers.

Additionally, the National Living Wage increased by 6.7% from April 2025, affecting payroll costs across the board.

Impact on Staffing Costs

Employers should expect higher staffing costs. According to the Office for Budget Responsibility (OBR), payroll costs could rise by around 2%. For minimum wage employees, that’s roughly £770 more annually, while the UK median earner at £33,000 could see around £900 extra (Institute for Fiscal Studies).

Many businesses may need to adjust service pricing or operational budgets to account for these increased employer National Insurance contributions.

How Much is National Insurance for Employers?

For permanent staff, the process is straightforward: apply the updated rates and thresholds to payroll. Employee pay remains unaffected, so broad communications are generally not needed.

Impact on Temporary and Agency Workers

Temporary staff remain subject to these changes. PAYE workers will experience the higher contributions, and complexities can arise depending on engagement models, including direct, agency, or umbrella arrangements. Understanding workforce spend and contractual nuances is essential to avoid unexpected costs.

Managing Employer National Insurance Costs

Businesses should:

• Monitor payroll and workforce costs closely to anticipate the impact of the new rates. Tools like an Employers National Insurance Calculator make it easier to estimate contributions across your workforce.
• Review engagement models for temporary or agency staff to manage tax and contribution implications.
• Plan strategically to manage cost and compliance across all workforce segments.

Expert Advice

Simon Lloyd, Solutions Architect: "Visibility across your workforce and proactive planning are critical under the updated Employer National Insurance contributions. Using payroll and workforce data effectively helps businesses manage costs and compliance."

Gattaca Solutions specialises in managing recruitment and workforce solutions for up to 2,000 hires annually. Our expertise spans employment law, payroll management, and recruiting for critical STEM skills, delivering operational efficiency, cost savings, and strategic value.

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Note: Gattaca Solutions does not provide legal or financial advice. This article is for informational purposes only and does not constitute legal or financial guidance.