UK Employers face rising costs in 2025: Higher NICs, employer taxes & sponsorship fees

Labour's policy roll-out on NI contributions and tax hikes

As the Labour Government starts to roll out their policies, businesses that rely on overseas talent are set to receive a new wave of challenges in 2025. The Chancellor, Rachel Reeves has proposed increases to National Insurance Contributions (NICs) and employer taxes as part of a broader plan to address public spending and economic growth. These increases are set to be introduced in April.

For employers holding sponsor licences that rely on recruiting talent from overseas, these changes could have significant implications, particularly when combined with the proposed increases in UKVI-related fees, as highlighted in our recent blog, where the cost of Certificates of Sponsorship (CoS) is anticipated to increase from £239 to £525 in Spring 2025.

Rachel Reeves’ plan to increase NICs and employer taxes is aimed at generating additional revenue to fund public services and support economic recovery. However, this will come as a cost for employers in sectors heavily reliant on overseas talent, who will face higher operational costs as a result.

The impact on employers who rely on hiring overseas talent

For sponsor licence holders, these increases come at a time when many businesses are already grappling with the financial burden of sponsoring overseas workers. The cost of hiring skilled workers from abroad includes not only salaries but also visa fees, the Immigration Skills Charge, and other associated costs. An increase in NICs and employer taxes could further strain budgets, making it more expensive to recruit internationally or extend the visas of the current workforce, where retaining existing overseas workers can help reduce the need for frequent recruitment.

For larger organisations with substantial resources, the increased costs may be manageable, albeit unwelcome. However, for small and medium-sized organisations the combined impact of higher NICs, employer taxes, and UKVI fees could be another significant deterrent.

As a result, some businesses may reconsider their reliance on overseas talent and explore alternative strategies, such as investing in domestic workforce development or automating certain roles. However, this will not be feasible for all businesses, particularly those in sectors facing skills shortages.

The demand for overseas talent unlikely to disappear anytime soon despite these rising costs

Despite the challenges, the demand for overseas talent is unlikely to disappear. Many UK industries continue to face skills gaps that cannot be filled by the domestic workforce alone. For example, the healthcare sector relies heavily on international recruitment to address staffing shortages in the NHS, while the tech industry depends on skilled workers from abroad to drive innovation.

Rachel Reeves’ plan to increase NICs and employer taxes, coupled with proposed rises in UKVI fees, presents a challenging landscape for sponsor licence holders. While these changes may deter some employers from recruiting overseas talent, the ongoing skills shortages in key sectors mean that international recruitment will remain a necessity for many businesses. Sponsorship is not the only option for employing overseas talent. Individuals holding certain visa types, such as Graduate, UK Ancestry, PBS Dependant, and Student visas (with work restrictions during term time), can be employed without the need for sponsorship. These visa holders are not subject to minimum salary requirements beyond the national minimum wage and do not incur sponsorship-related costs, such as the CoS and Immigration Skills Charge fees.

Contact Migrate UK

If you need further guidance, Migrate UK offers tools to identify the most cost-effective immigration routes for potential employees, potentially saving thousands. If you're interested, feel free to get in touch with us at info@migrate-uk.com or tel: 01235 645800.