Optimising your operations to overcome operating cost rises

The increase in employer National Insurance Contributions (NICs), coupled with a higher National Minimum Wage (NMW), demands a game plan. Staying on top of these rising costs while maintaining operational efficiency is paramount.

But there's good news. Optimising your operations isn’t just about scrutinising and trimming budgets. It’s about working smarter, making strategic updates, and leveraging creative solutions that save money without compromising productivity or your employees' wellbeing.  

This second instalment of our blog series focuses on practical strategies for operational optimisation, from tax-efficient benefits like salary sacrifice schemes to reducing overheads with smarter choices. Whether you're a CFO, HR Director, or business owner, this guide will help you dig deep into actionable ideas to safeguard your company’s bottom line.

Missed part one of the series? You can catch up here.

The power of tax-efficient benefits – a win-win strategy  

One of the most effective ways to mitigate rising payroll-related costs is by introducing tax-efficient benefits – specifically, salary sacrifice schemes. These schemes aren’t just a workaround; they’re an opportunity to restructure how you reward employees in a mutually beneficial way.

What are salary sacrifice schemes?  

Salary sacrifice schemes allow employees to exchange a portion of their pre-tax salary for non-cash benefits. For businesses, this lowers NICs by reducing taxable income. For employees, it often means access to perks at a lower cost compared to purchasing them independently.

Here are a few popular options:

• Pension contributions

Instead of taking deductions post-tax, salary sacrifice channels more into employees’ pension contributions pre-tax. This approach benefits both sides, with employees saving on income tax while employers save on NICs.

• Cycle-to-work schemes

Reducing your NIC liability can be as simple as promoting sustainability. By offering tax-free bikes or safety equipment through a cycle-to-work scheme, employees enjoy cost-effective benefits while the business reduces taxable payroll.

• Electric Vehicle (EV) schemes

Electric vehicle salary sacrifice schemes are gaining momentum, spurred by growing environmental awareness and tax incentives. Employers can offer their employees a route to own or lease an electric vehicle in a way that creates tax efficiencies by lowering take-home earnings, creating goodwill through the benefit while reducing overall payroll taxes. There are several leasing firms that can simplify the implementation of these schemes for businesses.  

• Annual leave purchasing

Giving your employees the option to purchase extra time for annual leave is a great way of boosting workplace morale while reducing your National Insurance bill.  

Why salary sacrifice works for employers

The maths is simple. Employers make lower NIC contributions because the taxable salary shrinks. For employees, these schemes offer benefits that would otherwise be expensive at retail cost. It’s a classic win-win solution. Plus, offering appealing packages can enhance employee satisfaction, retention, and morale.

Next steps to implement salary sacrifice  

1. Evaluate feasibility: Assess which benefits align with your workforce’s preferences
2. Choose a payroll-friendly provider: Work with platforms specialising in integrating these schemes into existing payroll systems
3. Communicate clearly: Provide detailed FAQs and examples of savings for your employees

Reduce overheads with smarter operational choices  

Streamlining costs doesn’t mean cutting corners; it’s about running your operations more intelligently. Here’s how you can tackle those overheads strategically:

Adopt carbon-efficient practices  

Reducing your carbon footprint can also reduce your operating costs. Energy-efficient technology, smarter energy usage, and waste reduction initiatives save money in office environments (or even in manufacturing). For example:

• Trackable consumption: Installing smart energy meters makes it easier to track your energy consumption and helps reduce costs
• Modern tech: Switching to cloud computing can cut IT infrastructure costs and energy consumption

Portfolio analysis and vendor rationalisation  

A deep-dive portfolio analysis is key to reducing redundancies:

• Vendor rationalisation: Are you using too many suppliers for similar products or services? Consolidating suppliers or solutions is simpler to manage, drives efficiencies and can provide improved access to data for strategic decision-making
• Service optimisation: Regular reviews of underutilised services (like software subscriptions) help you identify savings and reallocate resources toward essentials

Leverage technology for efficiency  

Investing in the right tools today ensures operational agility tomorrow.

• AI and automation tools: Applications like payroll automation software or HR tech reduce errors from manual admin, while optimising people’s time
• Data analytics: Real-time insights help you spot cost inefficiencies in daily operations and tighten your processes accordingly

While introducing new technology involves initial investment, it often pays for itself through improved productivity and efficiencies.

Encourage remote or hybrid work  

Remote work isn’t just another post-pandemic trend; it’s a viable strategy to lower costs. By reducing office overheads, from rent to daily utilities, flexible working models can create significant savings. Even hybrid schedules can make an impact – a recent study by Stanford University suggests that employees value being able to work from home two days a week as much as an 8% pay rise.

Actionable steps

1. Audit your business processes to identify areas of waste or inefficiency
2. Create a roadmap to phase out high-cost, low-impact services
3. Invest in updates progressively to minimise disruption.

Why optimising operations is about more than just savings  

While salary sacrifice schemes and operational adjustments are excellent measures for mitigating rising costs, they come with broader advantages beyond financial relief. These strategies help lay the groundwork for a resilient business and a more engaged, satisfied workforce.  

By being agile today, you position your company not just to weather the challenges of April 2025, but to thrive well beyond them.  

Looking ahead

The next blog in this series will take a deeper look at how development could be key to mitigating National Insurance hikes. Stay tuned for more actionable insights to prepare your organisation for the future.

Until then, consider how you can take the first steps toward smarter operations today. Small changes now will lead to enormous benefits down the line, for more information take a look at our tech guide below.