National Insurance Contribution increase: How to reduce national insurance costs for employers

Rising costs are putting more pressure than ever on UK businesses, and the recent increase in National Insurance Contributions (NICs) is no exception. As employers face higher payroll expenses, many are now looking for smarter ways to manage costs without compromising employee wellbeing or retention.

One effective and HMRC-approved solution is to make the most of salary sacrifice schemes.

What is a Salary Sacrifice Scheme?

A salary sacrifice arrangement allows employees to exchange part of their gross salary for a non-cash benefit, such as childcare vouchers, electric cars, or bicycles through Cyclescheme.

Because the exchange happens before tax and National Insurance are applied, both the employer and the employee pay less in NICs.

It’s a simple, HMRC-approved way to create savings on both sides, helping businesses manage payroll costs while offering employees access to valuable, cost-effective benefits.

How Employers Can Save on NICs

Salary sacrifice schemes offer a win–win for everyone involved. Here’s how they help reduce your National Insurance costs:

• Lower employer NICs: You only pay NICs on the reduced salary gross amount, cutting your overall contribution.

• Happier, healthier staff: Schemes like Cyclescheme encourage active commuting and boost employee wellbeing, which can reduce absenteeism and improve engagement.

• Attractive employee benefits: In a competitive job market, offering flexible, sustainable benefits helps you stand out as an employer of choice.

Example: Cyclescheme

With Cyclescheme, employees can get a new bike and accessories through a salary sacrifice arrangement, spreading the cost over manageable monthly payments. By paying from their gross salary, before tax and National Insurance, they can save up to 47% off the total cost of their bike and gear depending on their tax rate.

For employers, the benefits are equally compelling. By offering Cyclescheme, businesses can save up to 15% on the value of each bike through reduced National Insurance Contributions. It’s a straightforward, low-admin way to cut costs while supporting sustainable commuting, employee wellbeing, and financial health.

Salary sacrifice schemes like Cyclescheme are a simple, compliant and effective way to make employee benefits work harder for both sides. If you’d like to explore more about how these schemes can support your business, take a look at our related post: Salary Sacrifice Benefits for Employers.

Discover BHN Extras for Your Organisation

At BHN Extras, we help organisations create stronger, more rewarding employee experiences, from salary sacrifice programmes to digital rewards, recognition tools, and flexible benefits platforms.

Find out how our solutions can help you save on costs, boost engagement, and retain your best people.