There’s been a lot of buzz recently about the upcoming increases in both National Insurance (N.I.) contributions and the National Living Wage. Obviously, whilst both are good news for employees, for employers on the other hand, it’s a body blow.

It means higher staffing costs and even greater pressure on already stretched teams… all while we’re already in a tough spot with the global economy looking shaky. Margins are getting tighter, and growth projections are being slashed, meaning it’s a real challenge for companies in the UK right now.

But here’s the thing: in these tough times, business leaders’ focus needs to shift towards building a strong team that can keep the innovation and growth flowing. I think we’ll see some real unsung heroes stepping up across the workforce to help businesses navigate these changes. 

And those unsung heroes? They’re the payroll leaders.

The UK Business Landscape 

Let’s be real for a second: we all know that compounded cost increases, like NI contributions and National Living Wage, will hit businesses hard, especially companies already operating with tight margins. 

At the same time, Britain’s growth forecast has recently been slashed by The International Monetary Fund amid global trade tensions and inflationary pressures. The market has also witnessed more than 1,100 companies facing winding-up orders in the first 15 weeks of 2025 alone, the highest closure rate since the financial crash.

Those challenges paint a stark, if even worrying picture… but it’s not all doom and gloom. In fact, you’ll be glad to hear there are signs of resilience and opportunity for UK businesses. 

How UK Businesses Can Adapt and Thrive Amid Economic Challenges

Through recent economic chaos, from the 2008 financial crash to the COVID pandemic, UK businesses have shown again and again that they know how to adapt and innovate to survive. Even now, with all the ongoing economic challenges, businesses are still staying strong. And honestly? I’m proud to be running a business in the UK right now!

Research conducted this year, found that nearly half of UK adults (47%) are considering starting a business or ‘side hustle’ in the next twelve months, a significant increase from previous years, including a rise of 12% on 2024.

Also, the UK is embracing new innovations, the Prime Minister has announced plans for a “digital revolution”, saying that digitising public services and harnessing AI could unlock £45 billion in annual productivity savings. And, as of January, 37% of UK enterprise-scale companies reported having actively deployed AI, and 40% of those companies already exploring or deploying AI, say they have accelerated their rollout or investments in the technology. This shows a lot of innovation, flexibility and a real determination to meet growth targets. 

In my opinion, the key to success in this climate is to have a strong and capable team in place to foster innovation and drive continuous progress and growth. With 27% of businesses delaying or cancelling recruitment due to rising NI costs, teams need to focus on hiring the right people the first time and retaining top talent. We face a difficult economic environment, where salary increases may not always be feasible.

This means HR and, specifically, payroll leaders have a vital role to play in enhancing total reward packages to attract and keep staff. This could mean introducing flexible benefits, extended leave, and career development opportunities to boost morale and retention. And doing that requires people with a special set of skills (and no, not those held by Liam Neeson…).

Payroll Staff Are The Unsung Heroes 

Given all those factors, I’m confident that across UK businesses, payroll professionals will emerge as the unsung heroes of operations as economic and legislative conditions continue to change. Increasingly, they’ll be tasked with reviewing the company’s financial health, to help make informed decisions that are both strategic and sustainable. For example, it could be down to the team to explore new opportunities for cost savings, such as home working. 

The regulatory changes mark a significant shift in how businesses manage payroll, and it will be down to staff to adjust systems in real time. The added complexity of reforms reinforces the need to streamline payroll operations and this requires the expert knowledge that payroll professionals possess.

We will see payroll staff innovate with technology, for example, automating processes and integrating real-time regulatory updates to help reduce errors and administrative strain. And payroll could also use AI to help spot and avoid errors to ensure employees are paid on time and the correct amount, which is critical for building trust and avoiding legal complications. 

Payroll professionals are also often the frontline communicators when employees question changes to their pay or evolving policies. Employees will, very naturally be concerned about their job security, and the future of the company.

Payroll teams may respond to employees’ feedback and fears by implementing new policies and practices. For example, there is a growing trend for occasional and shift workers to have access to their pay as soon as it is earned. Earned wage access is a financial perk that allows employees to access part of the wages they’ve already earned before their next payday.  It’s most commonly offered to low-wage or hourly workers, who might have more difficulty meeting unexpected expenses.

By allowing staff to access part of their next pay package ahead of time, employers can give their employees more control over their money and help them avoid falling victim to the payday loan epidemic.

My advice to payroll leaders is to be transparent, open and honest in communication.

Speaking of which…

Collaboration Is Key

Payroll is no longer just a back-office task – it’s becoming a much more strategic part of the business. These days, payroll is always working closely with other departments, especially HR, who are already key players in the c-suite. To really thrive through tough times and all the regulatory changes, these teams need to pull together. For example, payroll teams are likely to seamlessly integrate with HR data to reduce repletion and ensure accuracy through automation. 

With salaries, bonuses, and benefits all being looked at, HR teams have a big job on their hands to create reward strategies that are not only financially sustainable but also competitive enough to attract and keep top talent. The key to getting this right will be using data-driven insights to build fair and motivating packages that align with performance goals and the needs of the workforce.

Payroll and HR teams will also need to ensure that businesses are taking full advantage of the government salary sacrifice schemes, where an employee can give up part of their salary in exchange for non-cash benefits. This can lower the amount of tax an employee pays, because the sacrificed salary is not subject to income tax or NI contributions. While many companies already offer salary sacrifice schemes for pensions fewer companies offer such schemes for other benefits like electric cars or everyday groceries.

Payroll Driving Stability 

As business margins get tighter, payroll teams are stepping up to play a much more strategic role and are managing the numbers while also supporting the wider goals of the business. By staying up to date, embracing new tech, and collaborating closely with HR and leadership, payroll pros can help guide companies through the tough times, increased pressure, and all the shifting regulations.