If you haven’t heard already, employer national insurance contributions are set to rise from April 2025.
As UK enterprises move forward to the deadline, the announcement has brought serious considerations to how profit margins are affected and where efficiencies can be made.
One significant challenge brought into focus for most organisations is the challenge of managing customer service operations sustainably with ever-increasing costs.
While the headline increase from 13.8% to 15% is sizable on a large workforce, it represents just one element in an increasingly difficult web of operational costs facing UK businesses.
National Insurance Changes - The Immediate Impact
For organisations managing medium to large customer service teams, the implications of the National Insurance changes go far beyond just the headline increase.
The reduction in the National Insurance contribution threshold from £9,100 to £5,000 represents a significant shift in employer liability.
This change is particularly impactful in customer service operations, where flexible staffing patterns and part-time roles are common.
The Headline Numbers
Let’s theoretically look at a customer service operation with 50 employees.
Under current rates of 13.8%, an employee earning £25,000 annually costs the business approximately £2,187 in NI contributions.
From April 2025 on the new 15% model, this same employee will cost £2,700 in NI contributions annually.
A £513 increase per employee.
You may feel this is insignificant over a small team. However, when multiplied over a 50-person team, this now equates to an additional £25,650 annually.
This is just for National Insurance alone.
Impact on Variable Staffing Models
Customer service operations often rely on fluidity and flexible staffing models to manage peak periods and season fluctuations.
With the latest National Insurance contribution changes, this model is likely to be under scrutiny for most organisations.
This is because part-time staff working above the new £5,000 threshold will now incur NI contributions where previously they would not have, reducing the viability of such resources.
Additionally, seasonal hiring costs will increase substantially, affecting peak period planning such as holiday coverage. For example, additional Christmas staffing to deal with demand.
This change also affects variable-hour contracts, which, moving forward, require careful management to maintain cost efficiency.
While the Employment allowance increase to £10,500 provides some relief, the overall changes for an employer to maintain cost-efficient customer service operations will continue to be challenging.
National Living Wage Hike
Understandably, when reviewing customer service operations, the most apparent costs are often those that appear directly on the balance sheet.
In 2025, these foundational expenses are also set for an upward trajectory too.
The National Living Wage is set to increase to £12.21 per hour. This creates a new baseline for customer service departments, which usually follow this minimum cost requirement.
For a typical 37.5-hour week, the annual salary of a typical customer service agent would now sit on average at £23,809.50 before any additional bonus or commission.
Compounding Pressures on Customer Service Operations
The combined impact of increased National Insurance contributions and the National Living Wage hike create a series of pressures for customer service functions in organisations.
While the increases might appear manageable in isolation, they significantly impact the total cost of maintaining internal customer service operations.
We’ve discussed how the changes directly influence the cost per contact, which is a key metric in customer service delivery.
So how does the increase in cost potentially reduce customer experience and service quality levels?
Rising Costs, Shrinking Margins
Quite obviously, the direct cost increase affects the business’s overall profit. Each customer interaction is now more expensive, chipping away at margins in an already challenging environment.
With base operational costs rising, recruitment will likely slow down, which will add pressure on existing staff.
This could expose the risk of poor customer support and service, which could lead to more dissatisfied customers due to longer response times.
Less Training and Development
In-house teams require training and development to carry out their services effectively. This becomes more challenging as costs rise and you need people covering their costs quickly.
This creates challenges where a business must either accept that time to competency now costs more or risk compromising on quality by expediting the time to handling tasks.
This also makes staff retention critical to cost management, as the cost of replacing and training new support team member becomes too expensive.
The Growing Shift to Outsourcing
As operational costs show no sign of slowing down in the UK, organisations are increasingly turning to Business Process Outsourcing (BPO) solutions for their customer service functions.
In fact, 48% of UK businesses already outsource some of their processes and functions to maintain an agile and efficient operation, and this growing trend is set to increase.
A recent study in “UK Contact Centre Decision-Makers’ Guide 2024” indicated a 23% increase in UK businesses exploring outsourcing options compared to previous years, with cost management cited as the primary driver.
Customer service outsourcing is becoming more popular as UK staff costs increase
A sector that is particularly at the forefront is customer service, as it is often seen as a liability rather than an income driver. This is pushing more and more businesses to seek more cost-effective solutions, which is where outsourcing enters the discussion.
For many companies, the change in strategy is more than just a cost saving exercise. Businesses are exploring outsourcing partners in an effort to maintain their customer service staff and quality while managing the escalating costs we’ve addressed.
Partnering with established outsourcing providers allows businesses to cope better with challenges such as rising National Insurance Contributions while ensuring their customer service operations remain competitive and efficient.
Removing The In-House Expenses
Yes, outsourcing reduces your salary contributions.
However, it also provides numerous savings outside of these items, and mitigates risk in several areas of your business.
No Infrastructure Required
Outsourcing immediately removes the substantial overheads of maintaining a call centre.
Infrastructure such as office space, furniture and telecommunication systems are all now the responsibility of your outsourcing partner.
Even telecommunication systems, such as call recording, are all paid for and maintained by the BPO.
Streamlined Onboarding
Outsourcing customer service offers significant operational savings by eliminating recruitment fees and reducing staff turnover.
Training is less of a concern for you, as your chosen outsourcing company will provide it for your agents and cover the associated development expenses.
This approach ensures more efficient management during peak periods without incurring additional overheads, giving you greater flexibility to scale up or down as needed.
The allocation of absences and breaks no longer becomes a headache for your business, and HR and staff management responsibilities shift to the BPO.
Why South Africa Makes The Perfect Partner
South Africa has emerged as a leading destination for UK organisations to use for customer service outsourcing.
The country possesses a unique combination of advantages that create an ideal environment for UK businesses to maintain customer service performance levels while reducing customer support costs.
Time Zone Alignment
South Africa’s time zone difference from the UK is always either 1-2 hours, depending on daylight saving.
This allows UK businesses to maintain standard business hours coverage from overseas and, equally importantly, enables live management of operations.
This means you can still maintain complete control as if it were within your own office space, facilitating real-time quality monitoring and supporting immediate escalation handling should it be required.
Seamless Cultural and Language Compatability
South Africa’s deep cultural ties with the UK allow customer interactions to flow more easily than in other English-speaking countries.
South Africa, first and foremost, has native English-speaking natives. They also possess a neutral accent, which means that people from the UK may not even know they are speaking to agents overseas.
This makes the outsourcing shift seamless compared to other regions where accents are more complicated to understand and cultural differences appear.
In South Africa, there is a familiarity with British cultural mannerisms, which allows for the building of natural rapport.
Proven Track Record
South Africa’s BPO sector has established itself as not just a reliable partner for UK organisations, but globally too.
Some of the largest organisations in the world have placed their trust in South Africa to maintain their service quality levels.
We’re proud to say we’ve worked with national brands such as 3 Mobile, Toys ‘R’ Us, Topshop and River Island.
Many choose to partner with South African firms because a robust telecommunications infrastructure is already in place, allowing for business continuity.
Compared to other regions where BPO partners reside, this is a huge advantage of choosing South Africa as a BPO destination.
The Cost Advantages
South African outsourcing solutions offer significant cost reductions in salary and reduce costs and tax expenses for businesses.
Typically, a 60% reduction in operational costs is found alongside lower infrastructure and training costs.
This frees up vital resources that can be applied to more productive business areas, such as product development or even customer retention and acquisition.
Taking the Next Step
As UK businesses face mounting cost pressures in 2025, the appeal of exploring outsourcing partnerships increases greatly.
South Africa has consistently proved a valuable partner for balancing cost efficiency and maintaining customer service quality levels.
At Consumer Links, we’re specialists in helping UK companies transition customer service operations from in-house to our South African call centre in Durban.
We help businesses reduce operational costs, maintain high customer satisfaction and provide a scalable product that makes growing your business seamless.
We’re your partner in creating a flexible and resilient service model to cope with the challenges of running a UK business.
Let's Discuss Your Outsourcing Requirements
We’d love to discuss how our South African operations can support your business growth objectives and reduce customer service costs.
Book a 30-minute meeting with our team today, and we’ll provide you with:
Detailed cost-benefit analysis for your specific situation
Implementation roadmaps
Case studies of successful UK transitions
Proof of concept opportunities
