The recent Autumn Budget brought with it an unwelcome announcement for many employers: an increase in National Insurance (NI) contributions. From April 2025, employer NI contributions will rise, putting additional pressure on already tight operating margins. As businesses digest what this means for their budgets and people strategies, one area which could help to offset increasing overheads energy efficiency.
While at first glance the connection between NI contributions and energy use might not seem obvious, the reality is that inefficient use of gas and electricity has direct impact on is directly linked to increased operational costs for your business. As such, a focus on minimising consumption through increasing energy efficiency can play a significant role in counteracting the looming rise in employment costs. For employers looking to maintain profitability and support job retention, smarter energy use can offer a practical and measurable way to relieve financial pressure.
At Boxfish, we’ve seen a growing number of businesses start to consider energy efficiency not just as a climate solution, but as a practical financial strategy - particularly in the face of rising operational costs. Whether it’s reducing wasted energy, improving building performance, or reviewing utility contracts, these steps can make a real difference to the bottom line.
The Financial Landscape Post-Budget
The increase in employer NI contributions will effectively raise the cost of employing people. For businesses that are already grappling with rising wages, energy costs, and supply chain disruptions, this could be the tipping point for difficult decisions.
The increase is part of a wider effort to strengthen public finances. However, for many businesses – and particularly SMEs - it may feel more like a tax on growth. The challenge is to absorb these additional employment costs without compromising competitiveness or headcount.
Energy Efficiency as a Strategic Lever
Energy efficiency is often discussed through the lens of sustainability and climate action. While those remain critical motivations, the financial case for energy efficiency has never been stronger.
Businesses that reduce energy waste and improve operational efficiency can lower their overheads significantly. Whether it’s simple initiatives such as upgrading to LED lighting, optimising heating systems, and investing in better insulation, or more bespoke capital projects, these improvements can translate to real cash savings month after month.
For example, an SME spending £50,000 a year on energy could feasibly cut 10-20% of that through targeted efficiency measures. That saving of £5,000–£10,000 annually could cover the increased NI cost for one or more employees.
Importantly, many energy efficiency improvements can be low or zero cost, such as switching off equipment overnight, setting timers and thermostats optimally, or engaging staff in energy - saving behaviours. These actions often have quick paybacks, delivering immediate or very fast improvements to the bottom line, which can be especially compelling as a call to action.
Building Long-Term Resilience as an Additional Factor
In an uncertain economic climate, resilience is everything. Energy efficiency not only saves money but also helps businesses become less exposed to energy price volatility. As seen over the past three years, fluctuations in gas and electricity markets have had a major impact on the financial stability of most SMEs.
By reducing consumption, organisations are less vulnerable to price spikes and more in control of their budgets. This predictability is invaluable when planning workforce costs and navigating financial pressures such as increased NI contributions.
Creating a Culture of Efficiency
Another benefit of focusing on energy efficiency is that it encourages a broader culture of resourcefulness and accountability across the organisation. From senior leaders to frontline staff, engaging teams in energy-saving behaviours can build awareness of operational costs and promote more thoughtful decision-making.
This cultural shift can deliver wider benefits, such as reducing paper waste, travelling smarter, or rethinking the use of office space. All of these contribute to a leaner, more cost-conscious business model, helping to offset not only the incoming tax increases but other rising costs too.
Making the Business Case
Despite the clear benefits, energy efficiency is still sometimes overlooked because the savings aren’t always immediate or visible. That’s why it’s crucial to approach energy efficiency as a strategic investment.
Government schemes and tax incentives, such as the Enhanced Capital Allowance (ECA) for energy-saving equipment, can support the business case. Pairing this with robust monitoring and evaluation of savings ensures that decision-makers can see the financial return alongside the environmental one.
Moreover, becoming more energy efficient strengthens a company’s sustainability credentials, which can be an asset in winning tenders, attracting investment, or recruiting staff who value responsible business practices.
Conclusion
The increase in employer NI contributions may feel like another hit at a challenging time. But it also presents an opportunity to look inward and reassess operational costs from a fresh perspective.
Energy efficiency offers a tangible, controllable lever for employers to reduce overheads and build financial resilience. By investing in smarter energy use, businesses can not only offset some of the impact of higher NI costs but also future - proof themselves against further volatility.
In the long run, a more energy-efficient business is a more competitive one – and in today’s climate, that could make all the difference.
The article was written by Denisa Ogoyi, Sustainability Consultant at Boxfish