The changes to employer National Insurance Contributions (NICs) that came into force yesterday will hit medium-sized businesses hard, with companies employing 20 or more staff facing costs of £8,472 annually, according to new analysis from Employment Hero.
Employment Hero’s analysis found that while the very smallest employers may benefit due to the extension of the Employment Allowance to £10,500, businesses with more than 8-10 employees will face significant additional costs, especially in higher-wage regions like London.
This follows concerning employment trends identified in Employment Hero’s latest SmartMatch Employment Report, which uses real-time data from 105,000 employees across UK SMEs. The report has shown that employment has contracted by an average of 0.3% every month since the NIC hike was announced in October, including a 0.4% decline in February alone.
Kevin Fitzgerald, UK MD of Employment Hero said, “These NIC changes create a significant burden for growing businesses at exactly the wrong time. Our data clearly shows that employers have been preparing for these increased costs since the announcement in October by slowing hiring, particularly among younger workers who have seen employment fall by 1.8% in February alone.”
“While the smallest businesses may benefit from the Employment Allowance extension, the cost escalates rapidly once you pass about 8-10 employees.
“A medium-sized business with 20 or more staff is looking at over £8,400 in additional annual costs – money that could otherwise be invested in growth, innovation, or higher wages. Larger firms are looking at close to £18,000 on average.”
“Regional differences are stark too – smaller businesses in London face costs sooner due to higher average salaries. You shouldn’t be punished for wanting to pay your staff enough to survive in an incredibly expensive city. Elsewhere, large firms in the Midlands have the highest average cost at almost £30,000.”
