How Will the Change in Employers' National Insurance Impact Learning and Development Budgets?

Big changes are coming. From April 2025, Employers' National Insurance contributions are set to rise from 13.8% to 15%, and the threshold will drop from £9,100 to £5,000. For businesses, that means one thing - higher employment costs. And when costs go up, the first instinct is to cut back.

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One of the first things on the chopping block? Learning and development (L&D) budgets. But here’s the question: is that really the smartest move?

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Let’s break it down.

What Does the National Insurance Increase Mean for Learning and Development?

According to PwC (2023), rising employment costs are forcing businesses to rethink their budgets. And sadly, L&D is often seen as expendable - an easy line item to slash when money is tight.

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But here’s the thing: investing in your people isn’t a nice-to-have, it’s a must-have.

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A McKinsey study found that businesses investing in employee development are 1.5 times more likely to report higher employee satisfaction and retention rates.

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So, while cutting L&D might seem like an easy win for cost-saving, it could actually be a huge mistake.

The Knock-On Effect: Skills Gaps and Talent Retention Challenges

Cutting back on L&D isn’t just about fewer training sessions - it’s about losing your edge.

• Skills gaps widen – Your team falls behind, and productivity takes a hit.
• Employees seek growth elsewhere – A 2023 LinkedIn Workplace Learning Report found that employees who feel unsupported in their development are significantly more likely to leave.
• Competitors pull ahead – The businesses that keep investing in their people will be the ones that thrive.

Why Cutting L&D Budgets is a False Economy

When times get tough, knee-jerk cost-cutting can feel like the safest bet. But slashing investment in upskilling employees or leadership and management training could cost more in the long run. Here’s why:

1. A Demotivated Workforce

Employees who feel stuck are more likely to leave. And replacing them? Expensive. A Training Industry study (2024) found that cutting L&D leads to lower morale, decreased innovation, and higher attrition.

2. Higher Long-Term Costs

Losing skilled people = higher recruitment costs + longer onboarding times. Training an existing employee is almost always cheaper than hiring a new one.

3. Leadership Pipeline Issues

Without leadership development, your future managers won’t be ready. And that leaves a big gap when senior leaders move on.

What Should Businesses Be Doing Instead?

Instead of cutting budgets for learning and development, smart businesses are protecting them, and making sure every penny is spent wisely.

1. Focus on High-Impact Training

Not all training is equal. Prioritise:

• Leadership and management training
• Critical skill-building
• Programmes that directly impact business performance

2. Get Smart About Costs

• Move to blended learning – Virtual and in-person training can reduce costs while keeping impact high.
• Use external providers – High-quality leadership programmes can be more cost-effective than running training in-house (we offer some really great manager training programmes at PUSH).

3. Align L&D with Business Strategy

A strategic L&D budget isn’t about training for training’s sake. It’s about:

• Identifying the most valuable skills for your business.
• Making sure learning directly contributes to bottom-line success.

4. Use L&D to Retain Your Best People

Investing in upskilling employees is a proven talent retention strategy. A LinkedIn survey found that 94% of employees would stay longer at a company that invests in their career development.

5. Prove the ROI

If training spend is under scrutiny, prove its value:

• Track how learning impacts performance
• Measure engagement and retention rates
• Highlight success stories to leadership

A recent MIT Sloan study found that soft skills training programmes deliver a 256% ROI within eight months of completion, demonstrating significant gains in productivity and business impact.

The Bottom Line

With the change in employers' National Insurance looming, slashing L&D might seem like the easiest way to save money. But short-term savings can create long-term damage.

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Instead, businesses should see learning and development as an investment in resilience, growth, and competitive advantage.

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Because when times are tough, your people will be the difference between struggling and thriving.

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Want to future-proof your team? We can help. Explore our leadership and management training programmes designed to build resilient, high-performing leaders.

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We’d love to help you create a tailored plan that supports your people and your business. Let’s chat - get in touch today.

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