Mitigating the Employer NI increase

The forthcoming increase in employer NI contributions is likely to see many businesses contract because of the additional costs. This article explores how you may still have the opportunity to grow through upskilling your Managers to increase the productivity of their staff.

An employee earning the UK average wage of £36,972, will cost their employer an additional £945.36 per annum in NI contributions. Thus methods of mitigating the Employer NI increase should be considered by all employers.

From 6 April 2025 employers will see a sharp increase in the NI they will have to pay for their employees. The percentage amount will increase from 13.8% to 15% and more impactful will be that the amount of earnings from when NI must be paid is being lowered to £5,000 from £9,100.

 

There are four options are open to the employer to mitigate this cost.

1 – Business contraction

Reduce the number of staff you employ. Either through not replacing leavers or redundancy.

2 – Product/Service inflation

Pass the cost onto your clients

3 – Profit reduction

Company to absorb the costs without detriment to clients or staff

4 – Business Growth!

If you increase the productivity of all your staff by more than the NI increase, you will continue to grow your business.  You can achieve this by:

  • Upskilling your existing staff through coaching and development
  • Better efficiency of using the Performance Management procedures to either manage staff up or if not possible, out.

How do I know whether there is the opportunity to achieve Business Growth using Coaching and Performance Management techniques?

Ask yourself the following questions?

  1. How many hours a month do your Managers spend on a one-to-one basis developing/coaching their staff? This should be a minimum of one hour per staff member that they manage and should be supported with a development plan. Ask to see the development plans as evidence.
  2. Staff coaching should be a standard task in Box 2 of the Eisenhower matrix (Important but not urgent). Do your Managers use the Eisenhower matrix?
  3. Ask your managers which coaching models they use? They should all be familiar with the basic models such as PESOS and GROW.
  4. Check if the number of underperformers at the annual review corresponds with the number of staff who were managed up/out using the Performance Management procedures. Then ask to see the development plans of each.

These four simple questions will clarify whether your Managers are ‘People Managers’ or ‘Admin Managers.’

If they are ‘Admin Managers,’ you have the opportunity to grow your business.