As businesses prepare for the upcoming increase in employers' National Insurance contributions (NICs), Mattioli Woods offers strategic solutions to help manage these changes while maintaining competitive employee benefits.
The 2025 NIC changes: what you need to know
From 6 April 2025, employers face significant changes to their NICs obligations. Secondary Class 1 NICs will increase by 1.2% to 15%¹, while the earnings threshold for employer NICs will decrease from £9,100 to £5,000¹. For many businesses, this means thousands of pounds in additional employment costs.
Salary exchange – a powerful cost-saving tool
Salary exchange schemes provide an effective solution for managing these increased employment costs. This arrangement allows employees to exchange part of their salary for non-cash benefits, creating significant tax advantages:
- For employers: lower gross salaries mean reduced NICs payments, offsetting the rate increase.
- For employees: higher take-home pay and immediate tax relief on pension contributions at their highest marginal rate.
Salary exchange can be used for benefits like bike-to-work schemes, childcare vouchers and holiday purchase. Not only does this flexibility help to offset rising NICs, but it also enhances employee wellbeing and improves retention rates in today’s competitive talent market.
Furthermore, employers can achieve additional NIC savings when employees direct bonuses into their pension plans, further maximising tax efficiency.
Cost savings in action
Consider a practical example: a company with 100 employees earning an average annual salary of £30,000, implementing a 5% salary exchange arrangement. The result would be a total salary exchange of £150,000, generating annual employer NIC savings of £22,500.
Why choose Mattioli Woods as your partner?
With over 15 years of implementing successful salary schemes across diverse industries, Mattioli Woods’ approach combines expert guidance with a personalised service. Its specialists will design a scheme tailored to your specific business needs, handle implementation with minimal operational disruption, provide clear communication that drives employee participation, and deliver ongoing support to optimise your scheme's effectiveness.
Get in touch – complimentary consultation
With cost increases looming, now is the perfect time to take advantage of potential savings. Mattioli Woods is ready to help you navigate these changes effectively. Email info@mattioliwoods.com today for a free consultation to determine if salary exchange is right for your business and how much you could save.
References:
1. HM Revenue & Customs (HMRC), 13 November 2024