British businesses are absorbing the impact of the government’s NI increase, with employer contributions briefly rising in April before returning to pre-hike levels in May.

This is according to analysis of over 600 SMEs which shows the average monthly NI expenditure per company jumped from £40,892 in March to £44,885 in April, with May data revealing average per-company costs dropping to £40,500.

While the April spike reflects the initial shock of the higher NI contributions, May’s figures suggest businesses are finding ways to manage their employment costs rather than settling for a permanent increase, without passing the burden onto employees.

While the exact steps businesses are taking to absorb costs aren’t fully clear, PayFit’s Chief People and Fulfilment Officer, Marie-Alice Tantardini, suggests the rise in employer NI contributions are prompting employers to explore different ways to reassess how they both manage their expenditure and maintain employee value.

“Our analysis suggests businesses aren’t just accepting higher costs – they’re adapting to them. Salary sacrifice is one clear option, as it helps to lower NI contributions while still benefiting employees. Some companies may also be reshaping benefits, introducing tax-efficient perks like cycle-to-work schemes or EV incentives, while others might be refining workforce structures to balance costs without impacting salaries.”

Figures also suggest SMEs could be offsetting higher employer NI contributions by increasing the amount of benefits they pay out to employees. Average per-company payments rose from £2,861 in January and £2,798 in February to £3,095 in April and £3,407 in May, signalling a shift in how employers are managing compensation. March saw an exceptional jump to £6,853, likely due to typical end of financial year adjustments.

*Analysis from PayFit