From 6 April 2025, the employer (Class 1 secondary) National Insurance rate rose from 13.8% to 15%. That’s a 1.2 percentage-point uplift – roughly a 9% increase per pound of NI-able pay.
Two other policy shifts amplified the impact:
- The secondary threshold fell to £5,000 (down from £9,100), meaning NI now kicks in much earlier.
- The Employment Allowance for eligible employers doubled to £10,500. Helpful – but modest relief against large wage bills.
For labour-intensive businesses, this change is not 6 marginal – it’s material.
Real-World Signals
The National Insurance rise isn’t just theory the effects are already visible in boardrooms, trading updates, and market forecasts:
- Next plc: The FTSE 100 retailer has openly f lagged an additional £67m in wage and NI costs for 2025/26. To manage the pressure, they’ve signalled a ~1% price increase but are also leaning heavily on efficiency programs to avoid losing competitiveness. This illustrates the balancing act between protecting margins and holding customer demand.
- Retail sector more broadly: According to the British Retail Consortium (BRC), the NIC change alone adds £2.3bn+ to the annual cost base of UK retailers. And that’s before factoring in the higher National Living Wage and other cost headwinds. For an industry already operating on single-digit margins, this scale of additional cost is a direct threat to profitability and store viability.
- Halfords: The automotive and cycling services group guided to ~£23m of incremental FY26 labour costs directly from the Budget changes.
At the same time, it reported a £30m statutory pre-tax loss in FY25 – driven mainly by a non-cash impairment – but the result underscores how rising staff costs can quickly tip thin-margin businesses into loss-making territory.
These examples show a clear pattern: employers are being forced into difficult trade-offs.
- Pause recruitment? You cap capacity and restrict growth.
- Raise prices? You risk losing competitiveness in a fragile consumer market.
- Hold prices on fixed contracts? Margins erode until you can reprice.
The pressure is real. But it doesn’t have to be terminal. There is another route.
Where ERA Group Helps
At ERA Group, we empower businesses to protect profit without cutting headcount, raising prices, or compromising service. By deploying sector specialists and leveraging our global scale, we uncover efficiencies most in-house teams can’t.
Contingent labour
Rebase agency fee structures, standardise T&Cs, and cleanse invoicing. Typical outcomes: midsingle-digit to double-digit savings on third-party labour costs – without reducing staff.
Workforce-adjacent costs
From workwear & linens to training, fleet, MRO, and IT support – we ease margin pressure while protecting SLAs.
Contract resilience
For customers bound by fixed-price contracts, we identify offsets in non-core cost lines to protect contribution until repricing windows open.
NIC optimisation
Ensure the £10,500 Employment Allowance is fully used and that payrolls correctly apply the new £5,000 threshold across entities.
Why This Matters Now
Every people-intensive business is touched – manufacturers managing seasonal swings, retailers running store networks, and B2B firms with fixed-price contracts.
With NI at 15% and wages still the largest cost line, you’re constantly trading between prices, volumes, and margins in a cooling jobs market.
The fastest way to protect profitability?
Get forensic on the cost of employing people (not the number of people).
ERA Group delivers that for you. With 1,000+ procurement specialists worldwide (100+ in the UK), we act as an extension of your team – benchmarking your position, negotiating better supplier terms, and finding hidden efficiencies.
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