5 things to consider when looking at redundancies following NIC increases

The planned changes to National Insurance Contributions (NIC) are likely to put added financial pressure on businesses across the UK. For business owners, accountants, and finance professionals, understanding the true impact of these NIC adjustments is crucial—not just for immediate payroll planning, but for long-term financial stability. While some businesses may fear that higher NIC costs will inevitably lead to redundancies, careful financial forecasting can help mitigate the need for drastic measures. Accurate forecasting, strategic planning, and the right financial tools are essential to navigating these changes effectively.

Understanding the Impact of NIC Increases on Businesses

As of April 6, 2025, businesses will face changes to Class 1 NICs, affecting employer contributions and increasing overall payroll expenses. While the Employers Allowance is rising from £5,000 to £10,500 per year, providing some relief for small businesses, larger companies with higher wage bills may still experience significant cost increases. Failing to account for these changes in a business’s financial projections could lead to cash flow disruptions, budget shortfalls, or even insolvency.

This is why business finance planning must be proactive rather than reactive. Before considering redundancies, businesses must conduct a thorough review of their employment costs, cash flow, and projected profitability. Cash flow forecast software such as Clearview, ensures that these calculations are accurate, reducing the risk of misinformed decisions.

Five Key Considerations Before Making Redundancies

Before making the difficult decision to let staff go, business owners, accountants and finance teams must evaluate several critical factors:

1. Understanding the True Cost of NIC Increases While rising NIC costs may strain business finances, employers must ensure they are accurately calculating their costs. A comprehensive cash flow forecast tool, such as Clearview, enables businesses to simulate various scenarios and assess whether NIC increases genuinely necessitate redundancies or if other cost-saving measures can be implemented instead. And because Clearview can calculate multiple employees in one go, its saves on time and increases accuracy of that calculation.
2. Maximising the Employers Allowance Many businesses might overlook the impact of the increased Employers Allowance. This can provide significant relief, particularly for SMEs. However, businesses must remember to input this manually into the Clearview forecasting tool, as it’s not automatically factored in. Using budget forecasting software like Clearview helps to ensure all deductions and allowances are considered before making any workforce reductions.
3. Assessing Workforce Costs Beyond Salaries Employee costs extend beyond just wages and NIC. Financial projection software can help businesses consider additional expenses such as pensions, benefits, and recruitment costs. Reducing headcount may seem like a short-term solution, but the long-term impact—such as rehiring and retraining expenses—must be included in financial modelling.
4. Exploring Alternative Cost-Saving Measures Rather than redundancies, businesses can explore options such as flexible working, reduced hours, or contract renegotiations. Using a free forecasting software like Clearview allows businesses to test various financial scenarios and assess which measures can maintain profitability without losing skilled employees.
5. Ensuring Redundancy Calculations Are Accurate If redundancies are unavoidable, businesses must ensure that payments are calculated correctly. Clearview provides a simple cashflow forecast template and a redundancy calculator to help businesses accurately estimate their obligations. Miscalculations could lead to legal disputes or unexpected financial burdens, so using reliable financial statement forecasting software is essential.

How Different Business Sectors Can Navigate NIC Changes

Startups and SMEs

For small businesses and startups, cash flow is often tight. A sudden increase in employment costs can threaten their profitablilty, cash flow and even their survival. By using cash flow forecast software UK startups can proactively adjust their budgets, ensuring that they remain viable despite changing tax obligations. Find out more about startup financial planning here.

Finance Professionals

For finance teams, precision in financial modelling is critical. Cashflow forecasting tools such as Clearview enable finance professionals to conduct scenario analysis and provide accurate reports to senior management, ensuring well-informed decisions. Learn more about how Clearview supports finance professionals.

Accountants and Business Advisors

Accountants and business advisors must support multiple clients in managing these changes. Accounting software for SMEs like Clearview helps automate calculations, reducing the risk of manual errors and saving valuable time. And being able to calculate multiple employees in one go improves accuracy. Discover how Clearview helps accountants and advisors.

How Clearview Simplifies the Process

Clearview offers a cash flow forecast online tool that is free, simple to use, and designed to save businesses hours of manual calculations. The platform provides:

• Time-saving automation for financial forecasting.
• The ability to calculate multiple employees in one go, improving efficiency.
• Reliable business finance software that seamlessly integrates various financial factors.
• Real-time data for making informed decisions about employment costs.

For businesses looking to take control of their financial planning, Clearview provides a free forecast software solution that simplifies NIC adjustments. Sign up for Clearview today. And if you still need to make redundancies, our helpful tool will help you to calculate redundancy costs.

Whether you decide to make redundancies or not, —sign up for Clearview’s free forecasting software today and gain the clarity needed for future financial stability.