The Impact of NICs Rise on Business Viability and Employment Rates 

In the upcoming Spring Statement, employers are not expecting any roll back to the increases to employers’ national insurance contributions announced in the Budget last October. The employer NIC rate is set to rise from 13.8% to 15%, and the threshold at which contributions are due will fall from £9,100 to £5,000. This change will raise an estimated £24.5 billion for the Treasury, but it also risks significant consequences for businesses and workers. 

What does this mean for businesses?  

The rise in NICs couldn’t come at a worse time for businesses already grappling with rising costs. The sectors that depend on lower-wage workers, such as retail and hospitality, will be hit hardest. With costs rising, many businesses may be forced to reduce staff numbers, limit working hours, or turn to zero-hour contracts. This is particularly concerning for young and low-paid employees, who are already most vulnerable in the job market. 

A double-edged sword for employment? 

With the minimum wage rising by 6.7% this April, for workers aged 21 and over, the combination of these changes will likely result in fewer job opportunities, especially for younger, entry-level positions. Some businesses will be forced to restructure their workforce or reduce hiring, further exacerbating the unemployment crisis. These changes are being introduced in what is already a fragile environment, with the Bank of England forecasting unemployment at 4.5% for the year and a continuing trend of fewer job vacancies across all sectors. 
 

Can we find a better solution? 

While the government’s move to increase NICs may address short-term fiscal needs, the long-term impact on businesses could be devastating. The economy is already under strain, and this tax hike risks stalling much-needed growth. We believe that if the Government’s goal is to increase revenue from  businesses, other alternatives should be explored such as excess profit tax on businesses which could raise revenue but should not inhibit economic growth, thus enabling the job market to grow. 

This is a time for businesses and policymakers to discuss smarter solutions that balance economic growth and employee welfare. At Setfords, our expert legal team is here to help navigate these changes and advise on how businesses can prepare for and mitigate their impact. 

Get in touch with Setfords  

As the largest platform law firm in the UK, Setfords is well-positioned to offer strategic advice on how businesses can best respond to these upcoming changes. If you’re unsure how the rise of NICs will affect your business or if you need guidance on mitigating its impact, don’t hesitate to contact us for expert advice.