New research1 by Canada Life reveals six out of 10 small to medium-sized employers (SMEs) will change their approach to insurance-based employee benefits when employer National Insurance contributions increase from 6 April2. In some cases, SMEs may cut what’s offered or who can access them.
From 6 April 2025, employers' National Insurance contributions (NICs) will increase from 13.8% to 15%. The level at which employers start paying NICs (the secondary threshold) will also reduce from £9,100 to £5,000 per year.
Canada Life commissioned a survey of 550 HR decision-makers at micro, small and medium-sized enterprises – companies with 1 to 249 employees – to understand the actions that companies will likely take when this increased employer cost comes into effect.
Findings suggest 61% of companies will change their approach to insurance-based employee benefits, to cut costs, though 23% said they intend to make employee benefits work harder as they will raise awareness of what’s already available.
Among the findings:
- 22% of SMEs said they will cut employee benefits available
- 18% will change what’s offered to cut costs
- 15% will encourage employees to pay for insurance health-related support services for themselves through salary sacrifice, and
- 5% of SMEs said they will stop providing any employee benefits.
It’s medium-sized companies, with 50 to 249 employees, who are more likely to reduce or change benefits, according to the survey.
Just 27% of micro employers (1 to 9 employees) questioned say they offer insurance-based employee benefits3.
The research found most popular employee benefits offered are group life insurance (29%), private medical insurance (27%) and annual health checks (26%)4.
One in five firms (20%) say they cover employees for group critical illness in case they’re seriously ill, while 16% of firms provide access to an occupational health service that could help them back to work following sickness absence and 14% cover employees in the event of ill-health for group income protection.
This research suggesting SMEs could make changes to employee benefits comes at a time when the government is already concerned about employee health and employers’ roles in relation to it.
The discovery phase of the independent Keeping Britain Working Review, published on 20 March, set out the government’s interest in employee health, the factors behind the UK’s high economic inactivity, and how government and employers can work together to tackle the issue5.
Commenting on the research findings, Chris Morgan, Head of Product and Proposition Strategy, Protection at Canada Life, said:
“Our findings show that under increasing cost pressures, many SMEs are reviewing the employee benefits they provide to find savings. Given their knowledge of the positive impact these benefits have on employee health and business productivity, workplace protection advisers are well-placed to support firms and ensure any changes are carefully considered.
“We know as an industry what a positive impact employee benefits can have on financial, physical and emotional wellbeing. It’s important that insurers and advisers work together to demonstrate this value and bring it to life for SMEs, so they can see why continuing to invest in employee wellbeing should remain a business priority.
“It is encouraging that some employers already recognise the importance of employee benefits in business success, as 39% are not planning to make any changes. Of the six in 10 who are planning changes, more than a third plan to boost awareness and engagement in the benefits provided, rather than reduce provision.
“With the Mayfield Review underway, the need for government, insurers, experts and businesses to work together to solve health challenges in the workforce has never been greater.”
-ENDS-
Notes to editors
1. Research conducted by Opinium, March 2025. Sample survey - 550 HR decision-makers at UK micro (1-9), small (10-49) and medium-sized (50-249) private sector employer businesses
2. Respondents were asked how the increased employer National Insurance costs from 6th April 2025 will change the organisation’s approach to insurance-based employee benefits. Results are shown in Table 1 below.
3. Respondents were asked if their organisation provides employees with insurance-based employee benefits such as life insurance, critical illness insurance and income protection.
4. Respondents were shown a list of employee benefits and asked which of the following they provide to employees. Results are shown in Table 2 below.
5. The Keep Britain Working Review, led by former John Lewis CEO Sir Charlie Mayfield, noted 8.7 million people in the UK (one in five of the working age population) have a work limiting health condition. Among these, 1.2 million are young people (aged 16 to 34) and 900,000 50 to 64-year-olds. It also found people who are out of work for less than a year are five times more likely to return to work compared to those who are out of work longer.
Table 1: How will increased employer National Insurance costs from 6th April 2025 change the organisation’s approach to insurance-based employee benefits
| It will not change our approach | 39% |
| We will raise awareness of the employee benefits that are already available | 23% |
| We will reduce the employee benefits we offer to cut costs | 22% |
| We will change the employee benefits we offer to cut costs | 18% |
| We will encourage employees to pay for insurance and health-related support services themselves through salary sacrifice | 15% |
| We will reduce the number of employees who are covered by employee benefits | 14% |
| We will stop providing any employee benefits to employees | 5% |
| NET: Will change | 61% |
Table 2 Which of these do you offer to your employees?
| Life insurance | 29% |
| Private medical insurance | 27% |
| Annual health checks | 26% |
| Employee assistance programmes (confidential counselling and support services) | 21% |
| Critical illness insurance that pays employees a lump sum when they have a serious illness, such as cancer, heart attack, or stroke | 20% |
| Gym membership and fitness classes | 19% |
| Face-to-face mental health counselling | 17% |
| Online self-help mental health and stress management tools | 17% |
| Occupational health service | 16% |
| Healthcare cash plan (reimbursement for routine healthcare expenses such as dental or eyecare) | 15% |
| Childcare vouchers | 15% |
| Income protection insurance that pays a monthly sum to replace some of the employee’s income if they are too ill to work | 14% |
| Phone and video GP appointments | 12% |
| A range of insurance benefits that they choose for themselves via an online platform | 12% |
| Virtual mental health counselling | 11% |
| Online nutrition and fitness programmes | 10% |
| Second medical opinion service | 8% |
| Phone and video dental appointments | 7% |
| Virtual physiotherapy service | 4% |
Enquiries:
Julie Hughes-Edwards,
Canada Life, 07803 249343,
julie.hughes-edwards@canadalife.co.uk
About Canada Life:
Canada Life is part of a group of companies controlled by Great-West Lifeco Inc., a Canadian headquartered, international financial services holding company with interests in life insurance, health insurance, retirement and investment services, asset management and reinsurance businesses. Through its subsidiary companies, Great-West Lifeco operates in Canada, the United States, and Europe. Great-West Lifeco trades on the Toronto Stock Exchange under the ticker symbol GWO and is a member of the Power Corporation group of companies.
Canada Life Limited began operations in the United Kingdom (UK) in 1903 and provides UK individuals and businesses with a range of retirement, investment, insurance and wealth solutions. Canada Life offers individual annuities, pension de-risking solutions, home finance, estate planning and investment options, and workplace protection products.
Canada Life Limited (no.973271) is registered in England and Wales, authorised by the Prudential Regulation Authority, and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Stonehaven UK Limited (no.05487702), trading as Canada Life, is registered in England and Wales and is authorised and regulated by the Financial Conduct Authority. Canada Life International Limited (no.033178C) and CLI Institutional Limited (no.108017C) are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority. Canada Life International Assurance (Ireland) DAC (no. 440141) and Canada Life International Assurance (Ireland) DAC are authorised and regulated by the Central Bank of Ireland.
Canada Life Asset Management is the brand for investment management activities undertaken by Canada Life Asset Management Limited (no.3846821), Canada Life Limited and Canada Life European Real Estate Limited (no.03846823). Canada Life Asset Management Limited is authorised and regulated by the Financial Conduct Authority.
Please note that while Canada Life Limited and Canada Life Asset Management Limited are regulated as stated above, property management and the provision of commercial mortgages are not regulated activities.
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