From 6th April 2025, the employer National Insurance (NI) contributions rate will increase from 13.8% to 15%, raising payroll costs for businesses across the UK. For HR leaders, this presents a challenge—but also an opportunity. By using salary sacrifice benefits, companies can offset some of these rising costs while enhancing their employee value proposition.

Businesses have a huge opportunity to take action, and deliver a win-win for both the business and its people.

The challenge: rising NI costs and employee financial stress

The increasing NI rate means employers will pay more tax on every salary paid. In parallel, employees are facing increasing financial pressures, with over half of UK workers saying money worries impact their work performance¹.

HR is at the centre of this storm, responsible for balancing cost efficiency with employee wellbeing. This is where salary sacrifice can be a game-changer, allowing HR teams to:

✅ Reduce employer NI costs while keeping total remuneration attractive

✅ Empower employees with tax-efficient benefits that stretch their salaries further

✅ Strengthen employee engagement and retention by providing meaningful financial support

The solution: salary sacrifice as a cost-saving and wellbeing tool

Salary sacrifice allows employees to exchange part of their gross salary for non-cash benefits. Because this reduces their taxable income, both the employer and the employee pay less tax (NI). This makes it one of the most effective ways to manage payroll costs while improving financial wellbeing.

‍How HR can use salary sacrifice to reduce NI and support employees

💰 Pension contributions – Redirecting pre-tax salary into pensions increases long-term financial security while cutting employer (and employee) NI costs.

🚗 Electric Vehicle (EV) leasing – A tax-efficient way to offer company cars, saving on NI while supporting green initiatives.

🚲 Cycle to work – Encourages healthier commuting habits while reducing NI liabilities.

👶 Childcare support – Helps working parents manage costs through tax-efficient childcare vouchers.

By utilising these schemes, HR teams can proactively manage rising costs while positioning themselves as champions of financial wellbeing.

HR as the driver of positive change

HR has an opportunity to lead the charge in adapting to the NI increase—not just as a cost-cutting exercise, but as a strategy to build a stronger, more financially resilient workforce. Implementing or optimising salary sacrifice schemes enables HR leaders to:

• Proactively save the business money while ensuring employees feel supported.
• Boost employee take-home value without increasing salaries.
• Enhance overall engagement and retention by providing benefits that make a real difference.

By taking action now, HR can demonstrate its strategic value, turning a financial challenge into a competitive advantage.

Next steps: making an immediate impact

To get ahead of the April NI rise, HR teams should consider:

1. Reviewing existing salary sacrifice schemes and identify areas for optimisation.
2. Educating employees on tax-efficient benefits to help them maximise their financial position.
3. Working with payroll and finance teams to implement or expand salary sacrifice options effectively.

With smart planning, HR can not only offset the impact of rising NI costs but also improve financial wellbeing across the organisation. 

This is an opportunity to be the hero of the business, delivering real value while supporting employees where it matters most.

‍

Sources:

¹LCP (2025) Survey of UK employees reveals 63% are borrowing to meet basic financial needs https://www.lcp.com/en/media-centre/press-releases/survey-of-uk-employees-reveals-63-are-borrowing-to-meet-basic-financial-needs

‍