A recent survey conducted by the accounting firm S&W revealed that one-third of UK business owners intend to reduce their workforce following the increase in National Insurance Contributions (NICs) introduced in April. The study, which polled 500 UK-based firms with annual turnovers exceeding £5 million, found that 20% of respondents had already cut jobs as a direct consequence of the higher employer NICs.
Chancellor Rachel Reeves confirmed in last year’s autumn budget that employer NICs would rise from 13.8% to 15%, alongside an increase in the earnings threshold at which businesses become liable for these contributions. The changes coincided with the national living wage hike and a reduction in business rates relief for certain firms.
The financial strain has forced companies to explore alternative cost-saving measures. Nearly half (46%) of surveyed firms plan to raise prices, while 35% are considering reducing staff hours. A further 29% are contemplating wage freezes, citing not only higher NICs but also rising energy costs, supply chain disruptions, and broader macroeconomic uncertainty.
Claire Burden, an advisory partner at S&W, noted that businesses face significant challenges in the current economic climate, with many forced to make difficult decisions to remain viable. She pointed out that wages constitute a major portion of operational costs, making workforce reductions an inevitable consideration for firms grappling with increased social security levies.
The findings underscore a broader trend of cost-cutting among UK businesses, with 33% of owners still anticipating further job cuts after experiencing the full impact of the tax rise. The data highlights the compounding pressures on firms navigating post-pandemic recovery amid inflationary pressures and tightening fiscal policies.
