A rise in employer National Insurance contributions (NICs) is set to take effect on Sunday, raising concerns about job losses, higher prices, and reduced working hours for staff, industry leaders have warned.
Starting Sunday, the rate of employer NICs will increase by 1.2 percentage points to 15 percent, impacting earnings from £5,000, down from the previous threshold of £9,100. This hike follows a 6.7 percent rise in the minimum wage introduced just last week.
The combination of these changes has raised alarms within the hospitality sector, with experts predicting a negative impact on job creation and business sustainability.
Kate Nicholls, chief executive of UKHospitality, expressed concerns about the significant consequences for businesses and workers. She stated, “The increases to employer national insurance contributions are going to hit businesses and workers right across the UK. The impacts will be stark, with reduced hours for staff, shorter trading hours, higher prices, and, in the worst case, job losses.”
Nicholls emphasized that these increases could undermine the government’s goal of getting people back into work, as the hospitality sector, which plays a key role in job creation, may be forced to scale back.
The increase is part of a broader strategy outlined by the government, with Shadow Chancellor Rachel Reeves projecting that the changes would raise £25 billion per year by 2029. Reeves acknowledged the tough decision but defended the move as necessary for public finances.
However, the Conservatives have strongly criticized the hike, calling it a “jobs tax.” Shadow Business and Trade Secretary Andrew Griffith warned that British businesses were already struggling, and this new tax burden could “flatten” them. He argued, “They don’t understand that it’s business, not big government, that drives growth. If they don’t reverse course quickly, working people will pay the price.”
Meanwhile, the Liberal Democrats have described the NICs increase as a “hammer blow” to businesses, with Treasury spokesperson Daisy Cooper arguing that it could lead to empty high streets. Cooper called on the government to reconsider, suggesting that the money should be raised by ensuring that big banks and digital giants pay their fair share.
Labour leader Sir Keir Starmer acknowledged the ongoing cost-of-living crisis and the financial pressures faced by households. However, he pointed to the recent minimum wage increase as a step toward alleviating some of these burdens. Starmer also noted that the start of April saw hikes in council tax and energy bills, further contributing to the financial strain on households.
Starmer told Sky News, “For most people, the cost-of-living crisis is ongoing, and they are feeling the financial pressure. That’s why it’s important that we deliver on our pledge to make people feel better off. The increase in the national living wage, which amounts to an average of £1,400 a year, will make a significant difference to millions of people, both this month and in the months ahead.”
As the government’s National Insurance hike comes into effect, its long-term impact on business stability and employment remains a key concern for many in the UK.
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