UK Employer National Insurance Contributions 2025: The Changes and How to Stay Compliant

As of April 6, 2025, the employer National Insurance Contributions (NICs) in the UK  have been facing major changes. These changes will raise employment costs and shift eligibility for government allowances. This means both local businesses and global employers must take proactive steps.

In this article, we’ll cover key information and tips for handling employer National Insurance Contributions:

• What are NICs and how do they work
• What’s changing in 2025, and who will be affected
• What do these changes mean for your business
• What actions employers should take

(Photo by Pixabay on Pexels ) 

1. What Are National Insurance Contributions (NICs) ?

National Insurance Contributions (NICs) are mandatory payroll taxes that fund the UK’s welfare system. The NICs support public services like the state pension, the National Health Service (NHS), unemployment benefits, and parental leave.

Who Pays NICs and What Are the Classes?

Both employees, employers, and self-employed individuals are required to contribute to the NICs system. Contributions vary depending on the employment status, and they are classified by different NIC categories:

• Class 1 (Employee): Paid by employees through deductions from their salary on earnings above the Primary Threshold.
  
  
• Class 1 (Employer): Paid by employers on top of wages paid, for earnings above the Secondary Threshold.
  
  
• Class 2 and Class 4 (Self-employed):
  • Class 2 is typically a flat weekly rate, applicable when annual profits exceed a set threshold.
  • Class 4 is a percentage of annual profits, paid once earnings exceed a specified amount.

To explore the full list of NICs thresholds, rates, and additional classifications, visit the official GOV.UK website for the latest updates. Meanwhile, Slasify has a complete guide for UK employment to help you get started on what needs to be done before making a first hire in the UK. 

Why NICs Matter to Employers?

Staying on top of employer National Insurance Contributions is more than a compliance task, as NICs are a mechanism to fund essential safety net programs. For employers, NICs can also affect recurring payroll costs that significantly impact budgeting and staffing decisions. 

NICs vs Income Tax and International Comparisons

NICs are different from income tax because they fund specific benefits like pensions and healthcare, rather than going into the UK's general budget. Many other countries have similar systems, like the Social Security Contributions in the U.S., but the structure, rates, and thresholds vary widely. For more information on hiring in the UK, please refer to Slasify’s UK employment guide. 

2. Key Changes to Employer National Insurance Contributions in 2025

On April 6, 2025, the UK government introduced four key changes: 

• The Class 1 secondary NICs rate increased from 13.8% to 15%.
• The Secondary Threshold was lowered from £9,100 to £5,000 per year.
• The Employment Allowance was raised from £5,000 to £10,500.
• The £100,000 eligibility cap for the Employment Allowance was removed.

These adjustments align with the UK’s Autumn Budget 2024, focusing on boosting national revenue and providing targeted relief for smaller enterprises. 

These updates to employer NI rates also represent one of the most significant increases in recent years, and the lower threshold means a larger portion of employee earnings will now be subject to NICs.

3. Implications for Your Business

Employers need to consider how higher employer NI rates and shifting thresholds affect different parts of their business. From budgeting and compensation to workforce structure and commuNICsations, the ripple effects are real. Here are some of the challenges that businesses may face:

Rising Employer Costs

At first glance, a 1.2% rate hike (from 13.8% to 15%)  might not sound like a mild change, but the impact grows quickly when scaled across your workforce. Here are some examples to illustrate the impact:

• A 10-person team with £35,000 salaries could pay around £4,200 more annually.
• A high earner making £70,000 may add about £840 to your payroll burden each year.

Employee Expectations

While employer National Insurance Contributions increases are paid by employers, employees may still have questions, especially if their take-home pay looks different due to other payroll deductions, slower bonus or raise cycles. Make sure to commuNICsate clearly about what’s changing and why, to avoid confusion among the team. 

HR Budgeting and Forecasting Considerations

As a result of rising employer National Insurance Contributions, HR leaders must reassess impact in all areas of the workforce:

• Compensation strategy
• Headcount targets
• Talent mix (full-time vs. part-time contractor)
• Pay band structures

Some companies may also rethink staffing altogether. There’s also increased interest in flexible models, such as hiring contractors. This allows companies to maintain workforce capacity while reducing exposure to employer-based payroll obligations like NICs.

Multi-Country Employers

For companies hiring in multiple countries, NICs change in the UK require careful separation in global payroll systems. Even small misalignments in classification or thresholds can lead to overpayment or compliance risk.

Global Employers & EOR Impact

If you're hiring UK-based talent through an Employer of Record (EOR), your provider is responsible for executing compliant NICs payments. However, since you still carry the legal liability, it’s critical to ensure your provider is up to date.

Slasify’s EOR service handles UK tax registration, applies the correct NICs thresholds, and helps you claim Employment Allowance if eligible. This reduces risk, simplifies cross-border compliance, and ensures payroll accuracy for your teams.

4. Recommended Actions for Employers

To minimize risks and impact, we recommend that employers take the following actions:

1. Confirm Employment Allowance eligibility: Many firms that were previously disqualified can now benefit from the increase.
   
   
2. Review payroll software and NI calculators: Make sure the software & tools have the latest NICs thresholds and rates updated.
   
   
3. Consult with your payroll provider or EOR partner: Ask if their platforms and advisory teams are NICs-ready to provide support and guidance on current & any upcoming changes.
    
4. Review payroll budgets: You should include NICs changes in your 2025 hiring and compensation plans.
   
   
5. Adjust salary projections or HR budgets: You can take actions such as increasing pension contributions or equity to offset rising payroll taxes.
   
   
6. CommuNICate changes clearly to staff: Be sure to let your employees know of the changes made to their salary structure, so there’s no misunderstanding. 

Keeping your HR and payroll teams up to speed is especially important if your company operates in multiple countries. Make sure your internal team understands which thresholds apply, how payroll classifications may change, and what updates need to be implemented. 

How Slasify Can Help Your Global Business Expansion

The NIC changes in April (2025) represent a meaningful shift in how employers manage payroll. With higher employer NI rates, a lower secondary threshold, and adjustments to Employment Allowance eligibility, businesses of all sizes will likely see an impact. 

With Slasify’s Employer of Record (EOR) and Global Payroll services, businesses can now manage complex tax compliance across borders. We stay up to date with evolving local regulations so your teams don’t have to. 

So, whether you’re expanding into the UK market for the first time or scaling a team, Slasify ensures you meet your compliance responsibilities while keeping operations agile and scalable. Contact us today to get started!

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