Employers’ National Insurance hike will impact London workers – London Business News | Londonlovesbusiness.com

The proposed employers’ National Insurance (NI) contribution increase of up to 2% will impact London workers, a leading tax expert has warned.

Despite assurances by the government that the measure won’t directly impact employees, Nicola Campbell, a Partner at UK Top 10 accountancy and advisory firm Azets, believes the cost of the increase will inevitably influence business decisions.

She said: “For small businesses, the NI increase represents an additional cost burden at a time when many are already grappling with the effects of a 6% rise in corporation tax just 18 months ago. The knock-on effects of this increase will surely be felt by workers, with businesses facing difficult decisions to offset rising employment costs.

“While the government maintains that the NI increase won’t directly impact employees, the reality is that these additional costs will inevitably influence business decisions – and these choices will likely trickle down to the workforce.”

Azets has its London base at London Bridge.

Nicola expects that to mitigate the increased cost, many businesses will be forced to consider measures that could impact workers

This includes reduced hiring of new roles for companies with significant wage bills, the additional cost may lead them to reconsider creating new roles. For example, a company with a £1 million payroll will face an additional cost of £20,000.

Recruitment freezes instead of filling vacant roles, businesses may require existing employees to take on additional responsibilities, increasing workloads.

Paused or reduced benefits enhancements plans to improve employee benefits, such as healthcare, pension contributions, or moves to a living wage, could be deferred to accommodate the rising costs.

Restrained salary increases for employers who had budgeted for a 4% rise in labour costs may feel compelled to reduce planned salary increases, affecting employees’ earnings potential.

Although early estimates suggest the NI increase will cost businesses less than earlier rumoured changes to NI on pension contributions, Nicola Campbell stresses the importance of considering the broader impact.

She added: “Even seemingly indirect measures like this NI increase will have repercussions, influencing employment practices in ways that may ultimately impact employees across the UK.”