From 6 April 2025, UK hospitality businesses will face a significant increase in Employers’ National Insurance (NI) contributions. This means higher costs per employee, adding further strain on payroll, hiring decisions, and profitability. With just weeks to go, hospitality businesses need to act fast to protect their margins and sustain operations.
What’s Changing?
Here’s a quick breakdown of the upcoming changes:
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Employers’ NI Contributions Increase – Rising from 13.8% to 15%, increasing payroll costs per employee.
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Lower Secondary NI Threshold – Employers will start paying National Insurance at £5,000 (previously £9,100), bringing more wages into the taxable range.
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National Minimum & Living Wage Increases:
- 21+ → £12.21 per hour
- 18-20 → £10.00 per hour
- 16-17 & Apprentices → £7.55 per hour
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Statutory Sick Pay – Increasing to £118.75 per week.
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Statutory Maternity & Family Leave Pay – Increasing to £187.18 per week.
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Neonatal Care Leave & Pay – New entitlement for parents of babies in neonatal care for 7+ days.
How Will This Impact Hospitality Businesses?
These changes mean higher wage bills, tighter budgets, and potential staffing challenges. The hospitality sector, already managing tight margins, will see increased costs, affecting:
✔ Profitability – Higher payroll expenses will cut into margins, making cost management essential.
✔ Hiring & Retention – Increased employer costs may lead to cautious hiring or limited pay rises.
✔ Pricing & Menu Adjustments – To maintain profitability, businesses may need to revisit pricing structures.
✔ Cash Flow Management – Higher employer NI contributions could tighten cash flow, impacting operational decisions.
For many operators, this means they must strategically reassess costs and workforce planning to ensure continued success. So, what can business owners do to stay ahead?
Five Strategies to Minimise the Impact
1. Optimise Your Workforce Planning
- Consider flexible staffing models, such as part-time, seasonal, or casual workers, to align payroll with demand fluctuations.
- Explore alternative compensation structures like performance-based incentives instead of wage increases to reduce NI liabilities.
- Cross-train staff to maximise productivity while reducing the need for additional hires.
2. Leverage Salary Sacrifice Schemes
- Encourage pension contributions, cycle-to-work schemes, or electric vehicle salary sacrifices to reduce taxable pay while benefiting employees.
3. Utilise the Employment Allowance
- If eligible, claim the £10,500 Employment Allowance, which reduces the amount of NI contributions you need to pay.
- Check eligibility requirements to ensure your business qualifies for this critical cost-saving measure.
4. Review Pricing & Customer Spending Patterns
- Assess menu pricing and promotions to absorb increased payroll expenses without alienating customers.
- Identify high-margin items and strategically encourage upselling to improve profitability.
- Consider introducing dynamic pricing for peak hours or special events to maximise revenue without excessive staffing costs.
5. Automate & Streamline Operations
- Invest in technology to reduce manual workload (e.g., automated ordering systems, self-checkouts, or scheduling software).
- Improve energy efficiency and supplier negotiations to cut non-labour costs.
- Use cash flow management tools to track and optimise expenses in real time.
Don’t Wait – Take Action Now
If you haven’t already assessed how these changes will impact your business, now is the time. The first few months of the new tax year might soften the blow due to the Employer National Insurance Allowance, but this relief will be used up faster than before. Delaying action could lead to unexpected cash flow issues, tighter profit margins, and difficult staffing decisions. Taking action now will help you stay profitable and competitive in a rapidly changing market.
FREE Carroll’s National Insurance (NI) Calculator
Successful pub operators don’t just react to challenges—they plan, adapt, and stay ahead. That’s why we’re offering an exclusive downloadable NI Calculator to help you break down the impact on your business and explore cost-saving strategies. Want access? Message us for more details!
Need expert guidance on forecasting costs, planning payroll strategies, and optimising your business model? Let’s protect your margins and plan for success. Get in touch today.
