USTech Small
0%
Loading ...
Ustech solutions logo black trans
Ustech solutions logo black trans

Topic: Global Hiring

Do National Insurance Increases Mean It’s Time to Consider a Bigger Shift to a Contingent Workforce?

}

5 minute read

By Jake Ellis
In the UK, recently announced national insurance increases are sending ripples through businesses, especially those with larger payrolls and tight profit margins. Employers face tough decisions on staffing budgets. Many have already started cutting back–one of the most notable is Sainbury’s who have made an instant and dramatic cut of 3,000 jobs. But, perhaps the smarter play is not to cut heads, but transition to more flexible hiring options moving forward—such as direct sourcing solutions. Read this article to learn why.

The New NI Changes Explained

Employers in the UK face a rise in secondary Class 1 contributions, jumping from 13.8% to 15% on eligible earnings. At the same time, the threshold for when employer NICs apply has dipped from £9,100 to £5,000, meaning a greater slice of each employee’s wages is now subject to these higher rates. According to government estimates, this shift could generate an extra £25 billion per year. However, the Office for Budget Responsibility suggests a substantial portion of the costs might eventually pass on to employees, even though businesses will still bear much of the immediate burden.

Payroll teams—especially in sectors running on tight margins—must handle these changes carefully. Mistakes in calculating or reporting these new contributions risk penalties and further financial strain. Careful compliance planning is vital to avoid compounding an already expensive challenge, especially under national insurance increases that hit larger employers hardest.

Potential Effects on Employers 

When employer NICs jump, businesses that operate on narrow profit margins or rely on large workforces can quickly feel the squeeze. Pushing costs onto consumers through higher prices risks hurting sales, while passing them on to employees—via wage adjustments or benefit reductions—can damage morale and retention. Neither option is universally popular or guaranteed to succeed.
In Deloitte’s latest 2025 CFO survey, 52% named cost reduction as their top priority for the 11th quarter in a row, and 64% expect a decrease in hiring—the steepest drop in four years—largely in response to national insurance increases and other rising costs.
Some organizations may consider curbing expenses through layoffs,
reduced hours, or other staffing cuts, but such moves carry
reputational risks and can lower employee engagement.
At USTech Solutions, we are seeing interest from many of our customers towards direct sourcing and other contingent workforce strategies, to introduce more specialized contract workers without indefinitely expanding payrolls. However, it’s not simply a matter of swapping permanent staff for temps—UK rules and ethical considerations govern how far companies can reshape roles in response to national insurance increases.

Minimizing the Impact Through Internal Measures

One potential solution lies in salary sacrifice or benefit restructuring, where employees can opt for perks like cycle-to-work schemes, enhanced pension contributions, or electric vehicles. This arrangement lowers the taxable portion of a wage, thereby trimming employer NICs—though the immediate savings may be modest.

Smaller businesses might also benefit from the boosted employment allowance, which has risen from £5,000 to £10,500, effectively offsetting some of the extra burden imposed by national insurance increases. Larger employers, however, may find this relief limited if their total NIC liabilities surpass certain thresholds. Finally, some companies consider renegotiating work schedules or compensation structures, but these discussions need transparent, respectful communication. Mishandling cost-sharing measures could erode employee trust and create bigger morale issues than the hikes themselves.

Understanding Legal Boundaries

Shifting from permanent employees to contingent labor simply to avoid higher national insurance increases can be risky. UK employment laws protect workers from being replaced en masse for cost-cutting reasons, and abrupt transitions may lead to legal complications or reputational damage. The UK also maintains robust worker protections, so employers must navigate any workforce changes with care and transparency.

That doesn’t mean contingent labor is off the table. Engaging contract-based staff to fill specialized roles or handle fluctuating demand is entirely legitimate—provided it’s done strategically and not purely for cost avoidance. Organizations refining their workforce structures should seek professional advice where needed. Upcoming sections will explore direct sourcing solutions and curated talent pools as ways to ethically and effectively bring in contingent talent, rather than employing quick fixes that sidestep legal obligations.

The Role Direct Sourcing Has to Play

Direct sourcing solutions let employers harness their brand identity to attract and maintain a pool of contingent professionals, often using technology platforms and ongoing engagement. Rather than resorting to agencies for every open role, organizations can pre-screen individuals for cultural fit and relevant skills. This structure cuts down on agency fees and keeps a ready pipeline of workers for high-demand positions.

Under national insurance increases, direct sourcing can offset some of the rising overhead by reducing reliance on traditional staffing. These curated talent pools emphasize compliance, strong employer branding, and streamlined onboarding—making direct sourcing solutions both cost-effective and respectful of UK regulations.

Curated Talent Pools and Their Advantages

A talent pool goes beyond a random list of names. It’s a community of professionals pre-checked for aptitude, personality match, and availability. By staying in touch with these candidates, a business can respond quickly whenever a new need arises, rather than scrambling to find someone at the last minute.

This approach matters even more when national insurance increases squeeze budgets. Having a pool of contingent talent ready to step in can minimize administrative overhead and reduce the time (and expense) spent on fresh recruitment. Whether the roles in question demand niche expertise or arise from unexpected surges in workload, curated talent pools help employers fill vacancies efficiently without excessive agency markups.

How US Tech Solutions Can Help

US Tech Solutions specializes in direct sourcing solutions that empower businesses to find and engage contingent talent—without leaning too heavily on old-school staffing agencies. Our focus lies in building curated talent pools, ensuring quick access to skilled professionals who align with each company’s goals. Leveraging the right technology, consistent communication, and robust recruitment methods, we can help lower time-to-fill and reduce overall hiring expenses.

Implementation Tips and Best Practices

Introducing direct sourcing and curated talent pools doesn’t have to happen overnight. A phased approach—testing one department or role at a time—lets you measure ROI, fine-tune processes, and gather feedback from employees or union representatives if applicable. Frequent audits assessing cost savings, fill rates, and NI compliance further validate each step.

Extensive training for HR, finance, and hiring managers is also essential. Everyone should understand how new technologies function and how contingent roles fit into your broader contingent workforce strategy. Data remains pivotal: tracking metrics like time-to-fill, cost-per-hire, and retention among contractors illuminates which adjustments yield the strongest returns.

Conclusion

The latest national insurance increases present real financial challenges for UK employers, especially in labor-intensive or margin-sensitive sectors. Adjusting budgets and rethinking workforce models becomes more complex when legal restrictions and employee relations enter the mix. Proactive planning and a clear view of compliance demands can help keep those hurdles in check.

Still, direct sourcing and curated talent pools give organizations a smarter way to manage specialized needs, especially under mounting tax obligations. By merging flexible hiring with a strategic approach to contingent labor, businesses can fill talent gaps quickly and responsibly.

Ready to elevate your contingent workforce? Contact US Tech Solutions today for a discovery assessment—let us show you how direct sourcing solutions and curated talent pools can strengthen your staffing approach and help you navigate evolving national insurance increases with confidence.

Recent Comments

    Related articles

    No Results Found

    The page you requested could not be found. Try refining your search, or use the navigation above to locate the post.