Navigating the Impact of Increased Employer National Insurance Contributions on Group Health Insurance

The recent Autumn Budget 2024 has introduced significant changes to the financial landscape for UK businesses. Chancellor Rachel Reeves announced a 1.2 percentage point increase in employer National Insurance Contributions (NICs), raising the rate from 13.8% to 15% effective from 6 April 2025. This adjustment is projected to generate an additional £25 billion annually for public services, including the NHS.

Implications for Group Health Insurance Policies

The rise in employer NICs will inevitably elevate the cost of employment, prompting businesses to reassess their expenditure on employee benefits, such as group health insurance. Some employers may contemplate reducing or eliminating these benefits to offset increased NIC expenses. However, it's crucial to recognize the enduring value of group health insurance for both employers and employees.

The Enduring Value of Group Health Insurance

1. Enhanced Employee Well-being and Productivity

With the 2024 budget increasing employer National Insurance Contributions from 13.8% to 15%, UK businesses face higher employment costs. This rise can impact cash flow and prompt companies to scrutinise expenditures on employee benefits, such as group health insurance. However, access to private healthcare through group health insurance can significantly benefit productivity by allowing employees to receive timely medical treatment and return to work faster. Rather than reducing benefits, companies that maintain group health insurance can help reduce the costly impact of absenteeism and health-related productivity losses, offsetting some of the financial strain from the NIC increase.

2. Attracting and Retaining Talent

In a competitive job market, comprehensive benefits packages are instrumental in attracting and retaining top talent. Offering group health insurance demonstrates a commitment to employee well-being, positioning the company as an employer of choice. Research indicates that businesses providing health insurance report higher employee engagement and job satisfaction.

3. Financial Protection Against Rising Healthcare Costs

With NHS waiting lists exceeding 7 million, employees may face lengthy delays for treatment. Group health insurance offers a safeguard against these delays, ensuring timely access to medical care and mitigating the financial impact of prolonged absences due to illness.

Strategic Considerations for Employers

While the increase in employer NICs presents a financial challenge, the benefits of maintaining group health insurance can outweigh the additional costs. Employers should consider the following strategies:

• Assess and Optimize Benefits Packages

Review existing health insurance policies to ensure they align with employee needs and company objectives. Tailoring benefits can enhance value without incurring unnecessary expenses.

• Leverage Tax Efficiencies

Although employer-paid health insurance premiums are considered a benefit in kind and subject to tax, they can still offer tax advantages. Employers should consult with tax advisors to optimize the financial impact.

• Promote Preventative Health Measures

Encouraging a culture of health and well-being can reduce the incidence of illness, thereby decreasing reliance on healthcare services and associated costs.

Conclusion

The increase in employer NICs necessitates careful financial planning. However, the advantages of providing group health insurance—enhanced employee well-being, improved productivity, and a competitive edge in talent acquisition—remain compelling. By strategically managing benefits packages, employers can continue to support their workforce's health and well-being, ultimately benefiting the organization's long-term success.

Other blogs which may be of interest:

Understanding the taxation of group medical insurance in 2024

Are group health plans addressing women's health needs?

Ascend Health is committed to assisting businesses in navigating these changes and optimizing their employee benefits strategies. Please don’t hesitate to contact one of our team.

Kristian.Breeze@ascendhealth.co.uk | Office: 01245 929129

Kristian Breeze - Healthcare Director