by Rotageek on 21 February 2025
The National Insurance Contribution (NIC) increase announced in the 2024 Autumn Budget is a new hurdle for hospitality and retail businesses already grappling with rising costs. For industries where wages are among the highest operational expenses, this change puts profitability and productivity under pressure.
But here’s the good news: while the challenge is real, it’s not insurmountable. By taking proactive steps now, industry leaders can protect businesses and ensure long-term success. Let’s break it down.
From April 2025:
For context, if an employee earns £30,000 per year, the employer contributes approximately £2,884 annually in NICs under the current rate, based on a 13.8% contribution above the threshold.
Under the new rate, the employer will contribute approximately £3,750 annually in NICs (based on a 15% contribution above the £5,000 threshold), representing an additional cost of £865 per year per employee earning £30,000.
Labour already accounts for over 30% of expenses in many hospitality businesses. This challenge, combined with ongoing inflationary pressures, means that employment costs could continue to rise, forcing tough decisions on pricing, staffing, or profitability.
Higher wage bills for the company may lead to a reduction in the number of staff, resulting in an increased workload and pressure for those who remain. With fewer employees, the expectations on current staff could rise, leading to potential burnout, reduced morale, and even further turnover.
It's crucial to acknowledge the impact of these changes on employee well-being and productivity, as the remaining workforce may struggle to manage the additional demands.
The impact flexible working practices could have on retention is important to consider—adapting shifts and roles to meet employees' needs can help with satisfaction and productivity.
Many workers in the hospitality and retail industries rely on flexible hours to balance family life, particularly as the rate employers pay rises with the national living wage and national minimum wage increases.
Profit margins in the hospitality sector typically hover around 3-5%, leaving little room to absorb rising costs without passing them on to customers—a risky move in a competitive market. To survive, many may turn to capital investment in technology to enhance efficiency, or explore flexible working practices to better manage staffing needs and reduce overtime.
Avoid costly overstaffing or being caught short at peak times. Use smart workforce management tools like Rotageek to optimise shifts based on accurate demand forecasting, helping you cut unnecessary labour costs while maintaining service quality.
Retaining your team is always cheaper than hiring. Focus on creating a workplace that people want to stay in, with perks like flexible shifts, career development opportunities, and recognition programs. As the national living wage and national minimum wage rise, ensuring that your pay structure aligns with these shifts is essential to retain top talent. In particular, parents rely on flexible schedules and stable income, making retention strategies that accommodate these needs critical.
Run a full operational audit:
Explore salary sacrifice schemes to reduce the NIC burden for both your business and your employees. For example, pension contributions or cycle-to-work schemes can lower taxable income while offering staff valuable benefits.
If price increases are necessary, communicate honestly. Position them as an investment in quality, sustainability, or employee welfare—messaging that resonates with customers who value these priorities.
Yes, the NIC increase adds pressure—but it’s also an opportunity to refine how you operate. Businesses that adapt quickly and strategically will emerge stronger, with more resilient teams and optimised operations. By investing in technology and aligning with flexible working practices, businesses can protect themselves from further financial strain.
With tools like Rotageek, you can stay on top of scheduling, enhance employee satisfaction, and ensure your workforce is both productive and happy.
Managing shift schedules and work patterns doesn’t have to be a hassle. With Rotageek’s rota scheduling software, you can eliminate the stress of scheduling and focus on what truly matters—keeping your business running smoothly.
Whether you're managing consecutive night shifts or balancing morning shifts, our software ensures you create the right schedule, every time.
RotaGeek Limited is a company registered in England and Wales with the company number 06783810 and registered address of 71-75 Shelton Street, London WC2H 9JQ
