When the Chancellor announced changes to employer National Insurance Contributions in the October 2024 Budget, the hospitality industry knew what was coming. From 6 April 2026, the employer NIC rate rose from 13.8% to 15%, while the secondary threshold — the point at which employers begin paying NI on a worker's earnings — dropped sharply from £9,100 to £5,000 per year. Those two changes together represent a significant structural shift in the cost of employing people in the UK.
For most industries, the effect is meaningful but manageable. For hospitality, it is acute. The sector employs more than 3.5 million people across the UK, the majority of them on part-time or flexible contracts, many earning close to the National Living Wage. That combination, large workforces, lower individual salaries and a high proportion of part-time hours, means hospitality is uniquely exposed to both elements of the change: the higher rate and the lower threshold.
(up from 13.8%)
(down from £9,100)
The Numbers in Practice
It is worth being concrete about what this means for a typical hospitality business. Take a part-time member of staff working 20 hours per week at the National Living Wage. Their annual earnings sit at roughly £12,500. Under the old rules, an employer paid NI on earnings above £9,100, so approximately £3,400 at 13.8%, amounting to around £469. Under the new rules, that same employer pays 15% on earnings above £5,000, so 15% of £7,500, amounting to £1,125. That is an increase of more than £650 per year for a single part-time employee.
Scale that across a restaurant with 20 part-time staff and you are looking at an additional cost of over £13,000 per year before a single extra shift is worked or a single menu price is changed. For a business already operating on margins of 5-8%, that is not an abstraction. It is the difference between a profitable year and a loss.
"According to UKHospitality, the combined impact of the NIC changes and the concurrent National Living Wage increase will cost the hospitality sector an estimated £3.4 billion annually — a figure that dwarfs any previous single-year cost increase the sector has faced."
Why Hospitality Feels It More Than Most
The structure of hospitality employment makes this policy particularly painful. Unlike sectors where full-time, salaried workers make up the majority of headcount, hospitality relies heavily on part-time, variable and zero-hours contracts. A busy restaurant might employ three full-time managers and fifteen part-time kitchen and floor staff. A coffee shop chain might schedule its entire workforce in 15-25 hour weekly blocks to cover peaks and troughs.
Under the old secondary threshold, many of these workers sat partially or largely outside the scope of employer NI. The drop to £5,000 draws almost every part-time worker firmly into it. The threshold is now so low — less than ten hours per week at the National Living Wage — that virtually no member of hospitality staff is exempt.
Add to this the fact that hospitality labour typically accounts for 30-35% of turnover, and you begin to understand why industry bodies have described this as an existential challenge for smaller operators in particular. A high-street restaurant cannot simply absorb a 10-15% increase in its single largest cost line without making changes somewhere.
Across the sector, the response has been a mix of menu price increases (typically 3-6%), reduced opening hours during lower-demand periods, tighter shift scheduling, a sharper focus on sales-per-labour-hour as a KPI, and investment in technology that helps existing staff serve more covers without additional headcount.
Most operators who have weathered the change well are using data, rather than instinct, to make those decisions.
Smarter Scheduling Starts with Better Data
One of the most immediate levers available to hospitality operators is smarter workforce scheduling. This does not mean cutting staff: it means making sure the right number of people are rostered at the right times, based on actual demand patterns rather than habit or rough estimates.
This is exactly where your EPOS system becomes a financial asset rather than just a transactional tool. A modern cloud EPOS platform captures granular sales data by hour, by day, by week and by season. That data, when surfaced properly, shows you precisely when your covers peak, when your bar revenue spikes, and when you are routinely overstaffed by one or two people during quieter mid-week services.
The Google Gemini AI integration within HDS Cloud Apps takes this further by running demand forecasting against your historical data, factoring in variables like local events, weather patterns and seasonal trends. The result is scheduling recommendations based on predicted demand, not last week's rota copy-pasted forward. For a venue spending £180,000 per year on labour, even a 5% efficiency improvement represents £9,000 in annual savings — more than enough to offset the NI increase for several members of staff.
Reducing the Cost of Each Transaction
A second route to offsetting higher employment costs is increasing revenue per staff member — serving more covers, processing more transactions and upselling more effectively without adding headcount. Technology supports all three.
QR code ordering, available as a module within the HDS Cloud Apps platform, allows guests at the table to browse the menu, place orders and pay without requiring a member of staff to visit. Orders go directly to the kitchen display screen. The floor team is freed to focus on service quality rather than order-taking administration. In venues where this has been deployed, operators typically report that the same team can comfortably manage 15-20% more covers during peak periods.
Similarly, AI-driven upselling prompts, delivered to staff through the EPOS interface at the point of order, have been shown to increase average transaction values by 8-12% in hospitality settings. When your labour cost is fixed, every pound added to average spend improves the return on that cost. The NI rise makes this kind of marginal gain more valuable, not less.
Reviewing Your Payment Costs at the Same Time
It is also worth reviewing your card processing costs alongside your employment costs, since both are ongoing overheads that compound quickly at scale. Many operators who come to us are paying processing rates of 1.5-2% or higher through legacy providers, often on contracts that auto-renew without review.
HDS Cloud Apps integrates with eight payment providers, with processing rates available from 0.3%. For a venue turning over £800,000 per year in card transactions, moving from 1.8% to 0.5% processing saves £10,400 annually. That saving, combined with smarter scheduling and higher per-cover revenue, can do a great deal to neutralise the NI impact without a single redundancy or price increase. You can model your own numbers using our free savings calculator.
Looking Ahead
The employer NI rise is not going away, and further pressure on hospitality labour costs is likely as the National Living Wage continues its upward trajectory. The operators who will navigate this period most successfully are not those who simply cut costs or raise prices in isolation. They are those who use better data to make smarter decisions: scheduling more precisely, selling more effectively and understanding their margins in real time rather than at month-end when it is too late to act.
If you run a bar, pub or restaurant and you are trying to understand exactly how the NI changes are affecting your bottom line, and what technology could realistically do to help, the team at HDS Cloud Apps would be happy to walk you through it. Book a free demo today and we will show you precisely where the numbers move.