Due to the NI increase, half of companies have cut back on their hiring.

Nearly half of UK firms are cutting back on hiring in response to an increase in employer’s national insurance contributions.

Yesterday (6 April), the national security contributions of employers increased from 13.8% to 15% and the threshold salary that they can be paid decreased from PS9100 to PS5,000.

According to a survey conducted by Reed, 46% of employers believe that the increase in tax will impact their recruitment decisions. Nearly two-thirds of respondents (64%) are concerned about this change.

Companies estimated on average that their profits would drop by 29% following the NI hike, which was accompanied by a 6.7% rise in the national minimum wage.

22 % of companies who said that they are not hiring, or have delayed hiring for the time being, said that they had a limited budget due to an increase in NI contributions.

Nearly a fifth (18%) of respondents said the economic uncertainty surrounding the future of the company was the greatest barrier to hiring.

Specifically, 27% of companies have postponed or cancelled hiring new employees due to the increased NI contribution. 16% plan to make redundancies, and 19% report that they will postpone/cancel salary reviews.

Reed’s survey shows that the NI increases are having a greater impact on businesses in London than outside of the capital.

60% of London-based companies said the NI would have an impact on their hiring decisions in this year. This compares to 38% outside London. Nearly a quarter (24%) of London-based businesses said that they had already made redundancies.

In order to cope with the increased national minimum wage, 26 percent of respondents said that this has led to a delay in hiring. Over a third of respondents (35%) stated that the increase had affected their ability to recruit. Nearly half (47%) of respondents said that they would have to raise wages for employees in higher-paying bands due to the increase in minimum wage.

London employers are the most likely in the UK to raise pay for their higher-paid workers. 58% said that the rise at the bottom of the salary scale was the reason.

This is in line with recent findings by Brightmine which revealed that nearly 60% of companies would be forced to increase wages and 75% expected challenges regarding pay differentials.

James Reed, Chairman and CEO of Reed Group, stated: “Everyone knows that difficult decisions must be made due to the state of public finances. But we warned that the increase in employers’ NI would be a tax on employment and it has proven that way.

The hole that this tax hike has left in the balance sheets of a million companies is regrettable. This is a difficult time for companies who want to expand or hire, and it will affect economic growth.

Reed stated that there are still many opportunities for qualified candidates. There is a wealth of talent in the UK. Businesses can adapt to this change without having to compromise their hiring goals.

If you focus on keeping your existing staff happy by offering them training and competitive salaries, you will be able to hire the right people for critical roles and reduce costs.

Charlotte Lucy Hall is the co-founder and CEO of HR technology start-up Zinc. She said: “The increased National Insurance Contributions were always going to be an added blow to UK businesses, especially with the added pressure from the impact of US Tariffs, placing the pressure on UK small-scale and early-stage businesses.

“Now, it’s imperative to hire new talent by being more cautious and focusing on roles that are essential and talent with a high impact. Each new hire has a greater impact on a business when hiring less staff. Businesses must be more strategic in their hiring decisions, and invest in tools and skills that will increase efficiency, reduce the workload of hiring teams and help them navigate an expensive market.

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