Are rising employment costs causing your business problems?

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UK businesses are bracing for higher employment costs, and the latest CIPD survey shows the impact is already being felt.

Nearly one in three companies are planning to cut jobs or freeze recruitment, and redundancies have hit a ten-year high (excluding the pandemic).

The reasons are clear. The upcoming increase in employer National Insurance contributions (NICs) and the National Minimum Wage (NMW) from April will push payroll costs higher.

The Government’s decision to slash the secondary NIC threshold from £9,100 to £5,000 is expected to have a major financial impact, with 90 per cent of businesses predicting higher employment costs.

How are businesses responding?

42 per cent are raising prices

24 per cent are cancelling or scaling back investment

19 per cent are cutting training budgets, despite its clear link to productivity

If your business is feeling the pressure, maybe it is time to rethink strategy, cut inefficiencies, and find new opportunities to manage costs.

Get ahead with financial planning

If employment costs are rising, you need clear visibility over your numbers.

That means going beyond basic budgeting and using financial forecasting to understand where costs will hit hardest.

Ask yourself:

Can payroll costs be offset by savings elsewhere?

Would switching suppliers or renegotiating contracts free up cash?

Is there room to automate processes and improve efficiency?

The sooner you identify potential cash flow pressures, the easier it will be to adapt.

Do not leave tax reliefs on the table

Many businesses fail to claim tax reliefs they are entitled to, yet these could make a real difference in balancing rising costs.

Some options to explore:

R&D tax credits – If your business is innovating, you could claim relief on qualifying expenses.

Capital allowances – Buying new equipment or making property improvements? You may be able to offset costs.

Apprenticeship funding – Recruiting apprentices could reduce hiring costs while building your workforce.

Rethink staffing decisions

Cutting jobs may seem like a solution, but it comes with risks.

Rehiring skilled employees later could be costly, especially in sectors already struggling with talent shortages like accountancy, construction, and education.

Instead, consider:

Redeploying staff into different roles

Upskilling employees rather than hiring externally

Using flexible working arrangements to manage payroll costs

Losing talent now could cost more in the long run. Focus on retaining key people while keeping costs under control.

Smart pricing and investment choices

If raising prices is inevitable, ensure your customers understand the value they’re getting. In a competitive market, justifying price increases is key to maintaining client trust.

Similarly, while some businesses are cutting investment, those that invest in the right areas could gain a long-term advantage.

Instead of across-the-board cuts, focus on: