UK businesses are bracing for significant financial pressures as rising employment costs force them to reassess budgets and workforce strategies.

Starting from April, National Insurance Contributions (NIC) will increase from 13.8% to 15%, while the salary threshold at which employers must begin paying NIC will drop from £9,100 to £5,000 per year. At the same time, both the National Living Wage and the Minimum Wage are set to rise, adding further strain on employers already grappling with inflationary pressures.

For many firms these rising costs could mean tough decisions on hiring, pay, and investment. Businesses unable to pass on or absorb the additional expenses will need to plan ahead and explore alternative strategies to remain competitive and financially stable.

The impact of workforce planning

With rising employment costs on the horizon, many UK businesses are bracing for a challenging year ahead. In fact, our research shows that three in five (60%) firms anticipate that the upcoming increase in National Insurance Contributions (NIC) will restrict their ability to hire new staff over the next 12 months. For some, the financial strain extends beyond NIC, with one in five citing the UK’s poor economic performance as a major obstacle to growth and 18% pointing to the rise in the National Living Wage and Minimum Wage.

Inflationary pressures are adding yet another layer of complexity, with just over 12% of businesses highlighting rising costs as a significant challenge.

As a result, many businesses are now re-evaluating their workforce strategies to manage these added costs. To manage the impact of higher NIC payments, a third (34%) of UK firms plan to pass some of the costs onto customers by raising prices, while 33% intend to reduce hiring and 28% will limit or cut salary increases.

Without proactive workforce planning and strategic cost management, some companies may find it increasingly difficult to maintain profitability or sustain growth in the months ahead. As businesses grapple with these financial challenges, careful decision-making will be crucial to ensuring long-term resilience and competitiveness in an evolving economic landscape.

The growing role of contingent workforces

While some businesses may choose to postpone the recruitment of new permanent staff, our research shows that 51% of firms are planning to increase their reliance on temporary workers as part of their regular workforce.

For many firms, temporary staff play a crucial role in maintaining flexibility and efficiency. More than two-fifths (41%) of employers looking to hire temp workers do so to manage seasonal demand and busy periods, ensuring they can scale their workforce as needed.

A third (34%) say they rely on temporary workers because the hiring process is quicker and more straightforward compared to recruiting permanent employees. At the same time, another 34% see temporary staff as a practical solution to help offset rising cost pressures, allowing them to remain agile in an increasingly challenging economic climate.

This shift highlights the growing trend of employers adopting contingent workforce programs as a strategic solution. Temporary, freelance, and contract workers offer businesses the flexibility to scale their workforce up or down based on demand, improving cost control during uncertain times.

Beyond filling short-term gaps, many businesses find that contingent workforce programs provide a sustainable solution by giving access to skilled workers who value flexibility. This approach can become a core part of a dynamic and resilient workforce strategy.

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Businesses will need to strike the right balance when adjusting to these changes — ensuring the necessary protections for workers while maintaining the flexibility they need to operate effectively.

One solution may be sourcing temporary workers through staffing platforms that ensure compliance with employment laws and give businesses access to a reliable, ready-to-work talent pool.

Best practices for managing a flexible workforce

Contingent workforces offer clear benefits, such as cost savings, scalability, and access to specialised skills. However, they also present new challenges for employers, including maintaining engagement, ensuring compliance, and managing operational continuity. Successfully overseeing a flexible workforce requires careful planning and the right strategies to maximise efficiency and business alignment.

Investing in workforce management technology can significantly streamline operations by automating time tracking, managing contracts, and ensuring compliance with employment regulations. Clear and consistent communication with temporary workers — through regular updates, structured onboarding, and well-defined expectations — helps align them with business objectives and fosters a sense of inclusion.

Providing professional development opportunities, such as skills training or career progression pathways, ensures that contingent workers remain motivated, productive, and well-equipped to meet evolving business demands. Additionally, businesses should establish a structured approach to workforce planning, ensuring they can scale operations effectively without compromising on quality or compliance.

By adopting a proactive workforce planning strategy and following best practices, UK businesses can effectively manage the complexities of a flexible workforce. Leveraging contingent and temporary workers could help to mitigate the impact of NIC and tax hikes, ensuring agility and cost efficiency in an increasingly dynamic economic landscape.