As of April 2025, employers across Northern Ireland have been hit by a significant rise in Class 1 National Insurance Contributions (NICs). The employer NIC rate has increased to 15%, while the employers’ secondary threshold has dropped to £5,000. This means monthly NIC payments have increased significantly, driving up payroll costs for local firms, writes Sinead Campbell, Head of Money Debt and Quality at Advice NI.
These changes come alongside an increase in statutory wages, meaning employers must now account for more staff falling within the NIC net while simultaneously budgeting for higher wage costs. According to NISRA, average earnings for payrolled employees in Northern Ireland rose by nearly 11% over the year to April 2025, largely driven by mandated increases in wages and contributions.
For many small and medium-sized enterprises (SMEs), especially in retail, hospitality, personal services and other owner-managed sectors, these increases are not sustainable. With limited resources, smaller firms often don’t have a buffer to absorb such dramatic cost hikes, threatening long-term viability for many. These SMEs are the backbone of our economy, accounting for over 99% of private sector businesses in the region, providing employment, and sustaining local communities.
Businesses in Northern Ireland are already navigating a difficult landscape marked by rising operational costs, declining consumer confidence and continued economic uncertainty. The first quarter of 2025 saw individual insolvencies in Northern Ireland rise by 10% compared to the same period last year, indicating the pressure building within our local economy. And it’s not just insolvency that’s cause for concern. A recent study by Ulster University for the Department of Finance warned that rising NICs could drive more employers toward “off-the-books” employment to save costs, expanding the informal economy and undermining fair employment practices.
Northern Ireland is uniquely exposed to the effects of the NIC hike. As the region with the lowest average pay in the UK, the proportional impact on local employers is more severe than elsewhere. While many were prepared for the uplift in the National Living Wage, the NIC increase came unexpectedly, blindsiding business owners and making financial planning significantly more difficult.
Although the situation is serious and many businesses feel they are reaching a breaking point, help is available. Advice NI urges businesses to seek advice early, before challenges escalate into crises.
Practical strategies can make a real difference in helping businesses navigate these challenging times. One of the most effective approaches is defensive budgeting, which means forecasting income and expenses conservatively, and reviewing budgets regularly to adjust for any changes. This proactive approach helps businesses avoid unexpected shortfalls and maintain better control over their finances. Businesses should also revisit supplier contracts, improve their credit control processes, and monitor cash flow closely to better manage financial pressures.
Most importantly, insolvency is not the only option. Many businesses that feel overwhelmed by debt can find ways to move forward with the right support. Advice NI offers free, confidential support through its Business Debt Service. Business owners can call 0800 915 4604 between 9am and 5pm, Monday to Friday, to speak directly with a trained adviser. The Advice NI website also offers a range of resources — from factsheets and letter templates to budgeting tools and a Northern Ireland energy price comparison service.
In 2024/25, Advice NI’s debt advice service, supported by the Department for Communities, helped 131 businesses with a combined debt of £7.3 million. With a network of 65 member organisations and 300 advisers, the Independent Advice Network stands ready to support any business in need.
