National Insurance increase: How will the channel respond?

Will partners turn to price rises to deal with the impact? Or will AI and automation be the key? CRN asks six channel leaders

To raise prices or not to raise prices? That is the question the channel is grappling with as April’s looming National Insurance increase creeps closer.

In the 2024 Autumn Budget, Chancellor Rachel Reeves announced the rate of employers' National Insurance contributions (NICs) will rise from 13.8 per cent to 15 per cent, from April 2025.

The level at which employers start paying NICs (the secondary threshold) will also reduce from £9,100 to £5,000 per year.

As the Labour government's major changes come into effect very soon, CRN spoke with six partner firms to learn how they, and the rest of the channel, are likely to be impacted by the rise, and whether price hikes are on the horizon for end-users.

Jack Watson, managing director, Bytes

How much is the National Insurance increase likely to impact your organisation?

The employer National Insurance increase is expected to have an impact on our organisation as I believe it will for everyone. I think the key thing to note is that tax is always paid for by people.

The interesting thing is which people this change will intentionally and unintentionally affect. Will it mean lower company profits and therefore lower income for shareholders, or will it pass through to affect the take-home pay of workers?

There is an ecosystem in every customer engagement at Bytes and I do believe this change will have an impact on all organisations to varying degrees because while the employer NICs are not deducted from the employee's salary, they do obviously represent an additional cost to the company. This cost can influence a company's decision regarding salary increases, bonuses, and hiring as much as add pressure on finances and strategy.

What is interesting is looking at this in terms of the government’s recently announced blueprint to turbocharge the economy with AI. While it is a massive opportunity for Bytes in leading AI projects with the likes of Microsoft, AWS & GCP, the advent of AI carries risks of a more contingent workforce, one where the tax system is less productive and there are potentially less employment rights.

The change in threshold where NI gets paid could mean proportionally the employer cost of hiring low earners goes up more than higher earners. Combined with Employer NICs going from 13.8 per cent to 15 per cent, there is a big wedge there to consider. Economies grow currently by businesses growing and employing more people. Those people then earn money and go out and spend it in shops. Reduced new headcount means less new money to spend on goods which could mean lower growth.

Let’s take Judson Althoff, CCO at Microsoft who earlier this month announced he has committed to his board that Microsoft are going to continue to grow revenue in the mid-teens, their current rates, without adding any incremental headcount for the next three years, primarily through the use of agentic AI.

Now, that is great for partners like Bytes as we help Microsoft make more possible. But continue that thinking into AI driving efficiency savings at a time where the cost of hiring people is increasing. I am an optimist, so I believe that a strong reskilling and supportive development of people can turn NHS administrators to more nurses and better public services. I think companies will, with our help, be able to respond and reshape the demands on digital work in this climate.

What measures are you taking to prepare for this increase?

At Bytes, we were fortunate that the announcement was made ahead of our budget for this current financial year so we were able to take proactive steps, conducting a thorough review of expenditure as we would normally do and exploring various strategies to mitigate the effects of this change.

The primary focus remains on improving the quality of services and ensuring minimal disruption to staff and value creation for clients.

We have a tremendous sense of respect and responsibility for our people and we are fortunate that we are fundamentally a growth company that's also a great place to work.

I interpreted that much of the NI change from the government is expected to be paid for by growth and again Bytes are fortunate that we have a strong, stable track record and long-term plan to grow.

That plan is multi-faceted because our vendors, partners, and clients will all need our core expertise more than ever to be more efficient, get competitive advantage, and deliver stronger growth.

Bytes are customer zero on Microsoft Copilot and our adoption internally is brilliantly packed with use cases that help us grow and make savings. Bytes prioritise investment and we focus on the long-term so it’s interesting when these things happen and to see us bend to the wind.

Cybersecurity sales typically have an uptick when new regulation comes into effect. I expect our ability to make substantial savings in IT spend for more clients who need to reduce their operating costs as a result of this tax change will keep us busy. Sometimes opportunity finds you in the most unlikely and undesirable of ways.

Will price increases be part of your plan to deal with the impact?

No. I think there are plenty of efficiencies in this opening act of AI alone to increase productivity and improve outcomes for our partners and clients.

There are two fundamental ideals that inform our strategy at Bytes; firstly, we grow great people to deliver amazing things; you will see that up in lights, and wired into our philosophy here, so despite the NI changes and new employment regulations potentially pushing businesses away from hiring in the lower end of the wage spectrum, we still have a strong sense of mission in empowering people to maximise their potential with the pace of earnings that matches that.

Secondly, helping organisations succeed in a world of change, through trusted partnerships and transformative technology is a Northstar for us.

Keep reading to hear from Flotek, Koncise Solutions, Climb Global Solutions, Highgate Solutions and inTEC…

Jay Ball, CEO, Flotek Group Limited

Will price increases be part of your plan to deal with the impact of the NI increase?

I think anybody who doesn't do price increases, is a bit of a fool, if you ask me, because ultimately it just needs to hit their bottom line.

I think naturally, because we are a people led business, and people are employing us instead of employing their own team to look after their IT, there has to be a natural pass on of these uplifting costs.

And so I think really it has to be linked to, if our costs go up, unfortunately, so do the customers when we’re providing a service they need.

We as a business have to put those costs onwards, of course. But what we're trying to do is invest in automation across our business, so that we don't have to keep on employing people all the time just to provide a service, and we can look at how we can automate some of these services.

We've also started employing internationally. We have engineers in other countries which support our team.

For us to be able to compete, we have to look at other ways at being able to make sure that we can get the talent and keep the cost as low as we can for customers as well.

Click next to find out which company believes it is too small to be significantly impacted...

Melissa Rambridge, CEO, inTEC Business - part of the inTEC Group

How much is the National Insurance increase likely to impact your organisation?

Of course, they're going to impact us. We're a services business with a skilled workforce, so it's absolutely a factor that needs to be taken into consideration.

It was factored into our budgets for 2025 and it will be one of many factors that come into play when we're conducting our annual pricing review for customers.

One of the key areas for consideration is that when we're looking at price increases for the customers, it's knowing we've got this increase in cost and what can we do via the likes of AI and automation.

All those things we're talking about to our customers, to enhance our own efficiencies internally, to also try to become more efficient internally, and therefore reduce the requirement, or the absolute must, for price increases.

So, any price increase passed on to the customer is well considered. We know it will land in line with our service, and it's not just the direct reaction to those NI increases, so to speak.

Up next, Koncise Solutions...

Ben Konopinski, founder and CEO, Koncise Solutions

How much is the National Insurance increase likely to impact your organisation?

A lot of the vendors have built in annual price increases or price increases at the end of contract on new terms.

We only work with subscription services, and everything's annually recurring. If the vendors have those price increases built in, that's one thing, and our clients and customers are used to that, and they know about that in advance.

It's where there's sudden increases or it's trying to make sure that you alleviate that. I think one way that's happening, because customers are looking at multi-year contracts to try and fix pricing for a longer term, which benefits us, but then also in the same vein, we're sometimes having to offer additional discounts to tie them into a longer term contract.

In the long run that is beneficial, but it definitely isn't something we want to do. We haven't had to look at it yet.

Because we're a small team the National Insurance increase doesn’t impact us that much.

Fortunately, we're a small team, we can stomach that, but it does also mean that that increase probably would have paid for another head.

So the net effect, I think, for the government is a loss from our perspective. It may not transpire that way and for everyone else, but for us certainly.

Gerard Brophy, CRO, Climb Global Solutions

How much is the National Insurance increase likely to impact your organisation?

Fortunately we are a large enough business where it's not going to make a massive dent, but it is a challenge.

I think it's a challenge for all organisations.

You have to look at margins. You have to look at costs from an efficiency perspective, because if you don't, you can get caught up, and there are significant changes that are coming

From a financial perspective, our teams are right on top of that. But you do need to maintain that. I think some small organisations are going to come under serious pressure.

Will price increases be part of your plan to deal with the impact of the NI increase?

A lot of our competition, who really don't have the value of what we provide, tend to cut costs.

If we increase pricing, we're going to put ourselves at a real disadvantage.

So, increasing pricing probably is not the way. It’s more from an efficiency standpoint, working closer with the resellers and the vendors on a deal for deal basis.

If they understand the true value of what we do, and they see it, they tend not to be too concerned about how much money we make.

It's when you get into an argument where you just quote to ship. And there's little value there, it's hard to maintain high margins.

Jenny Latimer, operations director, Highgate Solutions

How much is the National Insurance increase likely to impact your organisation?

I think it depends how tight a margin you're operating on is probably ultimately the decision that businesses need to make.

I think all businesses will obviously need to look at seed costs and how it is going to be affected.

I think we're definitely less affected. What I would say as well is, with our model being remote, we do not have the cost of an office.

So already our operating costs are going to be smaller, and also our model is two salespeople to one operations person.

Because we don't have a technical resource in house, a NOC or a SOC, and it is mainly just a sales focused business, we may be less affected as a result.