As UK businesses prepare for National Insurance (NI) contribution increases set to take effect on April 6, 2025, concerns are growing about the financial impact on employee benefits and overall staff wellbeing.
The industry body for the group risk sector, Group Risk Development (GRID), reports that over a quarter (28%) of senior HR decision-makers anticipate significant challenges due to higher costs, with small- and medium-sized enterprises (SMEs) feeling the strain more acutely at 30%, compared to 25% of larger corporations.
The impending NI hikes coincide with a reduction in the threshold at which contributions are due, further intensifying financial pressures on businesses. GRID’s research, conducted in January, reveals that 38% of senior HR decision-makers identify insufficient budgets as the primary obstacle to enhancing employee benefits. This sentiment is more pronounced among SMEs, with 42% citing budget constraints, compared to 30% of large corporates.
The Risk of Reducing Employee Benefits
In light of these financial challenges, there are concerns that employers might consider scaling back on employee benefits to offset increased costs. But such reductions could jeopardise staff wellbeing, morale and retention, say experts.
GRID spokesperson Katharine Moxham stressed the importance of demonstrating the effectiveness of employee benefits programmes to maintain budgets and support employee health and productivity.
“Employers will understandably be looking at their budgets in all areas to manage the additional NI contributions and other financial pressures,” she said. “It’s unlikely that HR will be exempt from the tightening of purse strings, so they must prepare to demonstrate the effectiveness of their employee benefits programmes to retain the maximum possible budget for them.”
Moxham added that “jeopardising the health and wellbeing of staff by making radical cuts will put the wellbeing of the organisation itself at risk too, so utilising benefits that provide comprehensive support and that are cost-effective will be the way forward.”
Cost-Effective Employee Benefit Solutions
Despite financial constraints, there are several budget-friendly strategies that employers can implement to support employee wellbeing:
- Health Cash Plans: These plans allow employees to claim back costs for routine healthcare services such as dental care, eye tests and physiotherapy. They are a low-cost alternative to private health insurance and can be tailored to fit various budgets.
- Group Life Insurance Policies: Offering financial protection to employees’ families in the event of untimely death, group life insurance is a low-cost benefit that can be enhanced with additional wellbeing services. The more employees included, the greater the discount per person.
- Employee Assistance Programmes (EAPs): EAPs provide confidential support for personal and work-related issues, including counselling and legal advice. They can be embedded within other benefits or offered as standalone services at a low cost.
- Virtual GP Services: With difficulties geting GP appointments, virtual GP services offer employees convenient access to healthcare professionals, reducing absenteeism and promoting health. These services are often included in other benefit packages or can be provided separately.
- Skills Development and Career Progression Opportunities: Investing in employee development through training courses, networking events and mentorship programmes can enhance job satisfaction and retention. Many of these initiatives can be implemented at minimal cost.
- Enhancing Workplace Environment: Creating a positive work environment through regular social activities, flexible working arrangements and recognition schemes can significantly boost employee morale without substantial financial investment.
Many group risk benefits, such as life assurance, income protection and critical illness cover, come with embedded services like EAPs and virtual GP access at no additional cost. Employers may already have access to these services but might not be using them fully.