How April’s National Insurance Rises Impacts Your Business

On the 6th April, a change took place that’s going to affect employers across the UK. Despite seeming like a small shift, it’s going to have a significant impact on businesses large and small. The rate of employer National Insurance (NI) contributions has increased from 13.8% to 15%, and it now applies to all salaries above £5,000, a significant drop from the previous £9,100 threshold. That makes it more expensive for businesses to employ people.

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What Does the National Insurance Rise Mean for UK Businesses?

Although the government has raised the Employment Allowance – which allows eligible employers to reduce their annual National Insurance liability – to £10,500, providing some relief for smaller employers, this policy change means that the cost of labour is rising. This is especially true for businesses with staff on mid to high-level salaries. The government has justified the change as being a way to stabilise public finances and address the NHS backlog.

But, for employers, this increase is more than a number on a payslip. It signifies a shift in how leaders plan, operate and sustain their businesses, especially as far as financial planning and staffing is concerned. Though a 1.2% rise – going from a rate of 13.8% to 15% – may seem small at first, the lower salary threshold means the cost of staffing is bound to have an impact quickly, especially for businesses already struggling to get by on tight margins.

The increasing cost of payroll squeezes cash flow, delays growth and innovation, and means business leaders are going to have to think twice about recruitment. This is why strategic leadership is key, not just to keep the business running amidst rising employment costs, but to build resilience and grab opportunities at the same time.

Here’s Why Strategic Leadership Matters More Than Ever

When faced with challenging conditions and financial uncertainty, businesses need to find a way to weather the storm. It’s not simply a case of having a big budget and funds to pull from, it’s about having a clear, strategic vision and strong leadership.

It Helps You to See the Bigger Picture and Plan Ahead

As a business leader, you can’t simply look at the here and now. You need to look at the bigger picture and plan ahead, having a strong vision of what you want to achieve. Instead of simply reacting to policy changes as and when they happen, you need to interpret them in context with everything else. Think about what the NI rise means for the broader economy, and how it could affect the labour market. Think about the risks it poses, as well as the opportunities. By identifying what these changes mean, and planning for various scenarios going forward, strategic leadership enables you to prepare for various scenarios. For example, rising NI might suggest a shift towards increased government taxation, which could go on to impact employment costs and pricing strategies.

It Helps You to Reconfigure Your Workforce Structure

With things changing, you need to make sure that your workforce is sustainable. Taking a strategic approach to leadership enables you to determine which positions are really essential, and which roles aren’t as critical as they once were.

It also helps you to find flexible workforce models that work for the business. For example, could some roles be outsourced or automated, or could a freelance or part-time arrangement work best? Think about if you have the right people in the right roles, or if there’s an inefficiency that could be streamlined by mixing things up.

It Helps to Prioritise Talent Retention Over Recruitment

With the NI rise making it more expensive to hire, it makes a lot more sense to retain the talent you already have, as it’s more cost-effective. The cost of hiring, interviewing and onboarding quickly adds up. This includes developing existing talent, ensuring you have access to the people you need to grow your business. To prioritise talent retention, you need to invest in employee development, engagement and wellbeing, all of which encourage employees to stay with you.

As a strategic leader, you can build a strong company culture that reduces turnover, as talent is less likely to leave if they feel a loyalty to the business. You’ll also find it a lot easier to ensure
internal career progression pathways are clear and compelling when you’re leading with a strategic mindset.

It Makes Financial Forecasting and Decision-Making Easier

Leaders who think strategically don’t simply accept rising employment costs and move on, hoping everything works out in the end. They adjust, making changes that ensure the business stays afloat, stable and competitive. This means revisiting budgets and forecasts to account for higher payroll taxes, looking at different business situations – and determining worst case and best case scenarios – and making data-led decisions on pricing, staffing and investment. A clear understanding of your outgoing costs, margins, cash flow and revenue makes it a lot easier to navigate unpredictable economic times.

It Drives Innovation to Help Offset Rising NI Cost Pressures

A lot of business leaders try to overcome rising NI costs by acting defensively, by cutting costs elsewhere, pausing recruitment or retreating in some way. But, strategic leaders do things differently. They innovate, using it to offset the cost pressures. Think about whether you could develop new products or services with higher margins, or if there are any untapped customer segments that you’ve overlooked. Think about where your competitors are falling short, and what you can do to come out on top. Look at new technologies and identify any that could help you to boost productivity, without increasing staffing. Rather than retreating under pressure, strategic leadership is all about evolving and emerging stronger than before.

It Enables You To Lead Confidently

During times of economic stress, which rising NI rates can be, employees and stakeholders look to leadership for reassurance. They want to know that everything is going to be okay, and that the business can survive the shift. Strategic leaders provide clear, transparent updates on business changes, and reinforce the business’ vision, values and goals. They communicate clearly, ensuring everyone knows what’s going on and that employees feel in the loop. They keep teams aligned and motivated, even when changes are hard. This clarity keeps the business cohesive and focused, rather than fragmented by fear, confusion or uncertainty.

With Increased Costs Comes Strategic Leadership Opportunities

There’s no denying that the rise in NI represents a financial burden for many businesses, and it’s a challenge leaders have to overcome. But, it also presents an opportunity to tighten focus, improve resilience and lead with intent. Rather than seeing it as a setback, see it as the perfect chance to look at your current operations and make changes to build a better, smarter and more productive team.

Use Strategic Leadership as a Competitive Advantage

Don’t make the mistake of assuming that the businesses most likely to stand strong amidst rising NI costs are those with the lowest costs or highest budgets, as that’s not always the case. For a lot of businesses, it’s strong, strategic leadership that will drive success and sustainability. In an economic landscape that’s bound to experience economic shifts, talent challenges and rising costs, strategic leadership becomes a vital skill to survive.

At Profici, we understand that strategic leadership doesn’t come naturally to everyone. You might prefer to be ‘in the trenches’ of your business, leaving the executive decision-making to someone else. If that’s the case, having an experienced team of executive leaders is key. You might even be a natural leader, but rising NI costs means hiring a CEO, CFO or CMO is out of the question. This is where a fractional C-suite comes in.

With a fractional C-suite, you benefit from expert leadership and guidance, without the commitment or cost that comes with hiring someone on a full-time, permanent basis. Get in touch to find out more.