How You Can Survive the 2025 National Insurance Hike

From April 2025, businesses across the UK, including restaurants and cafés, will face an increase in Employer National Insurance Contributions (NICs) from 13.8% to 15%. Additionally, the threshold for employer contributions will drop from £9,100 to £5,000, significantly raising payroll costs for many businesses in the hospitality sector.

For an industry already contending with rising energy costs, increased wages, and supply chain challenges, this change presents yet another financial hurdle. However, with careful planning, food businesses like yours can mitigate the impact and continue to thrive.

Optimising Workforce Planning

Labour is one of the most significant costs in the food service industry. By optimising workforce planning, businesses can reduce unnecessary expenditure while maintaining efficiency. Assessing staff schedules and using data-driven scheduling software can help align staffing levels with demand, ensuring that businesses are neither overstaffed nor understaffed at peak times. Cross-training employees can also provide greater flexibility, allowing team members to handle multiple roles, thereby reducing the need for additional hires. In some cases, flexible contracts, such as part-time or seasonal arrangements, can better match staffing needs to business fluctuations.

Streamlining Operations for Cost Efficiency

Streamlining operations is another important step in offsetting higher payroll expenses. Automation can help by implementing self-service ordering systems, digital payment solutions, and kitchen management software, which can enhance efficiency and reduce reliance on labour. Reducing wastage through portion control strategies, closely monitoring inventory, and repurposing ingredients can also help lower costs. Investing in team training can improve service speed and quality, leading to higher table turnover and increased revenue.

Strategic Pricing Adjustments

While raising menu prices should be a last resort, minor adjustments can help balance rising costs without alienating customers. Introducing small price increases gradually can prevent customer dissatisfaction while helping the business absorb the cost increases. Optimising menu offerings by focusing on high-margin dishes and limiting low-profit items that require excessive labour or costly ingredients can also improve financial health. Bundling meal deals and upselling add-ons can increase the average customer spend without significantly raising individual item prices.

Leveraging Tax Reliefs and Government Incentives

Taking advantage of tax reliefs and government incentives is another strategy that can help ease the financial burden. Small businesses may be able to claim up to £5,000 under the Employment Allowance to reduce their employer NIC bill. Businesses that hire apprentices can access government funding through the Apprenticeship Levy, which can help with training costs. Investing in energy-efficient equipment may also allow businesses to claim tax relief under the Annual Investment Allowance (AIA), reducing overall expenses.

Expanding Revenue Streams

Increasing revenue streams is another way to absorb additional payroll expenses without cutting staff or reducing service quality. Implementing customer loyalty programmes can encourage repeat business. Expanding into delivery and takeaway services, either by partnering with delivery platforms or offering direct ordering incentives, can generate additional income. Hosting themed nights, happy hours, or seasonal promotions can attract more customers and boost sales.

Outsourcing Non-Core Functions

Outsourcing certain functions can also reduce payroll costs while maintaining service levels. Instead of hiring full-time cleaning staff, you could consider third-party cleaning services. Accounting and payroll functions can be outsourced to reduce administrative burdens and improve financial management. Marketing and social media management can also be handled by freelance professionals or agencies rather than hiring a dedicated employee.

Conclusion

It's no doubt that the upcoming increase in Employer NICs presents a real challenge for food businesses, but proactive financial management and operational efficiency improvements can help mitigate the impact. What can also help is speaking to us. We specialise in working with restaurants, cafés, and takeaways, so we understand the unique financial hurdles of the food service industry. No jargon, no fluff – just practical, industry-specific advice to help your business thrive. If you're interested in finding out more about how we can help your restaurant become more profitable,  book a call with one of our accounting experts or call us on 0113 240 4100.