In recent years, the UK government has actively encouraged businesses to hire apprentices, offering a unique opportunity to build a skilled workforce while cutting costs. One of the most compelling incentives? The chance to save on National Insurance Contributions (NICs), is a significant benefit, especially as employer NICs are set to rise in 2025. Making payroll expenses a bigger burden for businesses.
What’s Changing with National Insurance in 2025?
Starting in April 2025, major changes to National Insurance rates and thresholds will directly impact employers. The employer NIC rate will jump from 13.8% to 15%. While the secondary threshold, the point at which employers start paying NICs, will decrease from £9,100 to £5,000 annually. This means businesses will start paying NICs on employee earnings above £5,000. Smaller businesses, already working with tight margins, will feel the squeeze more than ever.
How Employers Can Save: The Apprenticeship NICs Exemption
Here’s where the good news comes in! One of the best ways for businesses to save on NICs is by hiring apprentices. Under a special exemption, employers don’t need to pay NICs for apprentices under 25 who earn less than £967 a week (£50,270 annually). This exemption can result in considerable savings on payroll expenses.
What’s more, the NICs exemption applies not only to new apprentices but also to employees currently enrolled in an approved apprenticeship programme. As long as the apprenticeship meets government criteria, such as being part of an approved standard or framework, employers can benefit from this financial relief.
Double Savings: The Increased Employment Allowance
As if the NICs exemption weren’t enough, employers will also see a boost in the Employment Allowance from April 2025. The allowance will increase from £5,000 to £10,500, meaning that businesses can reduce their NICs liability by up to £10,500 each year. This change will be especially helpful for small and medium-sized enterprises (SMEs) who are already grappling with rising NIC costs.
When businesses hire apprentices, they can take full advantage of both the NICs exemption and the increased Employment Allowance, maximizing their savings and reducing their NICs burden substantially.
Beyond NICs: The Long-Term Benefits of Hiring Apprentices
While the NIC savings are certainly a huge draw, hiring apprentices offers a wealth of other advantages. Apprenticeships provide employers with the opportunity to shape a workforce that fits their specific needs. By training apprentices in the precise skills required by the business, employers ensure their workforce is always up to date with the latest industry standards.
Moreover, apprenticeships are a smart long-term investment. Apprentices bring fresh energy, new ideas, and a strong work ethic, which helps businesses stay competitive. Businesses that hire apprentices often report better employee retention rates, as apprentices tend to stick with businesses that invest in their development.
For employees, apprenticeships provide a clear, structured path to career advancement. They get to earn a wage while gaining valuable, nationally recognized qualifications. making apprenticeships an attractive choice for ambitious individuals eager to build their careers.
How Employers Can Maximise These Incentives
To fully take advantage of these incentives, businesses must follow a few key steps. First, ensure that the apprenticeship programme meets government standards and that the apprentice is enrolled in an approved scheme. Employers can partner with apprenticeship providers or training organisations to find the right programme for their business.
Additionally, businesses must apply for the NICs exemption through HMRC correctly and make sure all paperwork is in order so the apprentice’s wages are classified appropriately.
As National Insurance Contributions rise in 2025, it’s more important than ever for businesses to explore ways to lower payroll costs. Hiring apprentices offers a powerful strategy to save on NICs, thanks to the exemption for apprentices under 25 and the increased Employment Allowance. Beyond the savings, apprenticeships help businesses invest in the future by developing a skilled workforce and attracting motivated, career-driven employees.
For businesses eager to grow in 2025 and beyond, apprenticeships represent a win-win solution! Benefiting both employers and the talented individuals they bring on board.
For more information on changes to National Insurance in 2025, visit the GOV website: Rates and thresholds for employers 2025 to 2026 – GOV.UK