UK businesses, particularly SMEs, will be grappling with significant economic challenges next year, as a result of Rachel Reeves’ first Budget. Many will see finances under pressure from both the increase to employer National Insurance Contributions (NICs) and the minimum wage.
However, this also presents a unique opportunity for employee benefit consultants to help SMEs to implement strategic adjustments — especially in the areas of salary sacrifice and health benefits.
By reviewing and rethinking benefit strategies, immediate cost concerns can be addressed while setting the stage for positive, long-term outcomes that support diverse, multigenerational workforces, a critical imperative against the backdrop of the UK’s retirement shortfall.
Salary Sacrifice options
The chancellor announced a hike in national insurance in the Budget, with employer NICs rising from 13.8 per cent to 15 per cent from April 2025. As a result salary sacrifice has emerges as a practical solution for many SMEs.
This model allows employees to reduce their gross salary in exchange for increased employer contributions into benefits such as pensions. Not only does this approach reduce the NICs owed on the sacrificed portion, but it also helps both the employer and employee save on costs while boosting retirement savings.
By demonstrating its potential to alleviate budget pressures and align with long-term workforce needs, consultants can help businesses integrate salary sacrifice into their benefit strategies.
Additionally, upcoming changes to auto-enrolment thresholds — such as the removal of the lower limit — offer SMEs an opportunity to revisit their pension contribution and reward structures, ensuring they maximise the financial advantages of salary sacrifice.
Health and retirement security
The UK’s ageing population presents serious challenges in terms of both retirement funding and healthcare, with issues like Covid and the ongoing cost-of-living crisis both negatively impacting both.
Employee benefit consultants have a critical role to play in addressing both issues, helping SMEs manage the financial strain while also working towards improved health and retirement outcomes for their employees. The connection between workforce health and retirement security is becoming increasingly clear. Employees in poor health are more likely to retire early, relying on state support rather than private savings. By investing in health benefits and wellbeing programmes, employers can create a more resilient workforce, reduce absenteeism, and boost productivity. At the same time, promoting employee health enables workers to plan for retirement with greater confidence and peace of mind.
Effective benefits advice is vital in guiding SMEs through the development of health benefit strategies. Offering access to healthcare, mental health support, and comprehensive wellbeing programmes is essential, particularly as more responsibility for public health is falling to employers.
As SMEs adapt to the changes introduced by the budget, effective communication about all elements of a benefits programme, will be crucial in maintaining employee trust and engagement.
Salary sacrifice, for example, can be a complex concept for employees to understand, particularly when it comes to its tax and pension benefits. Consultants can help employers communicate these strategies clearly, ensuring employees grasp the full value and impact of benefit changes. By providing clear explanations and guidance, consultants can ensure that employees are informed and confident about the changes to their benefits.
There is no doubt that the 2024 budget brings new challenges, but is also presents opportunities to deliver meaningful change. Employee benefit consultants are in a prime position to help SMEs develop strategies that address immediate financial pressures and lay the foundation for long-term workforce wellbeing and financial security. By implementing salary sacrifice models and enhancing health benefits, SMEs can navigate rising costs while supporting employees’ health, financial wellbeing, and their retirement futures.