How development could be key to mitigating National Insurance hikes

For many organisations, this isn’t just a minor payroll adjustment – it’s a tsunami of increased costs that demands strategic action.

In this second part of our series, we shift focus to something every business depends on – its people. By rethinking workforce skills and working practices, businesses have the chance not only to survive this fiscal gale but to thrive beyond it.  

Here’s how focusing on people development, flexible working practices, and smarter workforce management can help smooth the financial turbulence ahead. 

Missed parts one and two of the series? Catch up here:

• Part one: Your guide to 2025 National Insurance changes
• Part two: Optimising your operations to overcome operating cost rises

Upskilling to boost efficiency and morale  

When the margins tighten, there’s little room for inefficiencies. This is where workforce development comes into its own. Conducting a comprehensive skills analysis across your workforce can identify untapped talent and skills gaps that, when addressed, can translate into higher productivity and reduced reliance on overlapping roles or additional staff.

Imagine an administrative assistant who, with a bit of training, can successfully take on key aspects of project management. Efficiency doesn’t always mean hiring extra talent – it can often mean unlocking the hidden potential of existing employees through tailored skills development.

The benefits of people development

• Higher productivity: Employees equipped with the right skills can tackle tasks more efficiently and potentially cover more ground, streamlining operations
• Improved employee retention: Investing in personal and professional development sends a clear message – you value your employees. This, in turn, fosters loyalty and reduces costly turnover
• Enhanced morale: A confident, skilled workforce is a motivated one. Employees who feel they’re growing professionally are far more likely to bring their best selves to work

Financial leaders might initially see training as an extra expense during challenging times. However, its ROI can often outweigh the cost of recruiting and onboarding new hires – particularly in labour-intensive industries including retail, hospitality, and healthcare, which already face additional stressors such as minimum wage hikes.  

Exploring flexible working practices

Traditional models may no longer be the most efficient way to manage workforces, particularly in a world increasingly driven by digital technology. Flexible working practices including hybrid working and non-standard working patterns offer a game-changing opportunity for businesses to rethink how, where, and when work gets done.

Benefits of flexible working

• Improved efficiency: By allowing employees to work at their most productive times, you could see a marked increase in output
• Reduced overheads: Hybrid or remote working reduces the need for physical office space (and all the costs that go with it)
• Better employee wellbeing: Employees with greater work-life balance are less likely to burn out, ensuring sustained productivity

Employers in healthcare and hospitality might write themselves out of this option, thinking “we can’t work remotely!” However, flexibility isn’t limited to location. It could mean smarter shift patterns, job-sharing arrangements, or even condensed hours that make operational sense while addressing evolving employee demands.  

The hidden (and not-so-hidden) costs of redundancies  

When facing higher costs, redundancy may seem like a tempting, straightforward fix. But proceed with caution – the true cost of redundancies goes far deeper than the severance payments and paperwork involved.

True costs of redundancies

Financial impact

• Potentially high severance packages for long-serving employees
• Recruitment costs if replacements are eventually needed
• Overtime costs if remaining employees are stretched thin to cover responsibilities.  

Impact on morale

• Reductions in headcount often dampen staff morale, leaving remaining employees feeling insecure, overburdened, or less engaged. Negative morale can lead to a vicious cycle of voluntary departures, further negatively affecting productivity  
• Increased risk of burnout in remaining staff as tasks and responsibilities are redistributed across the team

Operational disruption

• Key knowledge and expertise may be lost when experienced employees are let go

Strategic workforce planning – such as multi-skilling team members or reassigning responsibilities – often offers more sustainable results.

Wider impacts on labour-intensive industries

It’s no secret that industries reliant on hourly workforces – hospitality, retail, healthcare, and the like – are facing compounding pressures. The National Insurance changes come alongside increases in the National Minimum Wage, effectively delivering a double hit to profit margins.

Yet, these industries also stand to gain the most from workforce optimisation. By leveraging the right strategies, such as upskilling employees, streamlining shift scheduling with technology, and carefully reallocating resources, even the most labour-dependent businesses can make big strides toward weathering the incoming storm.

Technology as the accelerant to workforce change

Any transformational change needs the right tools to make it happen. Technology is the unsung hero behind many of the strategies discussed here.

• Skills assessments can be conducted more efficiently using platforms designed to highlight gaps and opportunities for development within teams. As a starting point, you can take our skills gaps quiz
• Scheduling software can support flexible working arrangements and prevent unnecessary overtime, keeping costs aligned with operational needs
• HR and payroll software can model the costs of redundancy, including severance payments and impacts on workload, thereby allowing leaders to make more informed decisions

While change of this magnitude might feel daunting, technology handles much of the heavy lifting, allowing decision-makers to focus on long-term strategy.

Future-proof your business

The financial pressures coming after April may seem inevitable – but they don’t have to spell disaster. By focusing on skills development, adopting flexible working practices, and making wise workforce decisions, businesses can not only soften the blow of rising costs, but position themselves for long-term success.

This is part three of a four-part series. Stay tuned for the final instalment, where we’ll explore essential considerations for businesses facing April 2025’s payroll changes to help you prepare for the future.