After the increase in NICs, a third of companies plan to cut more jobs

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S&W, a professional services group, published the results of its Business Owners Sentiment Study ( BOSS), which surveyed 500 UK business owners who had turnovers greater than PS5 million.

The report found that 20 percent of companies had already cut their headcounts as a result of the NIC changes announced by the budget for October 2024. Another 33 percent plan to do so.

Employers will face a rise in employer’s NICs, from 13.8% to 15 %, as well as a reduction in the threshold where the tax is first paid.

Two-thirds (35%) of respondents have reduced the number of hours their workers work, while another 29% plan to do so. Twenty-two percent (22%) have frozen wages, and another 29 % are planning to. For 21% of respondents, recruitment freezes were implemented. Another 35% planned to stop hiring.

Cost increases were the biggest threat to businesses. This was true for either increased prices of raw materials or goods (31%), or both. Owners with more than 500 staff reported that rising costs for their employees had affected them 41%.

One third (31%) of respondents said that global political uncertainty had affected their business, whereas one fifth said it was impacted by reduced customer demand (22%), labor shortages (21%), or cyber attacks or data breaches.

Claire Burden is a partner at S&W’s consulting team. She said: “Businesses are facing considerable challenges, and owners have to make tough decisions to remain afloat in this economic climate.

It is not surprising that businesses are closely monitoring their headcounts as a result of rising national insurance costs.

The most common answers to the question of what factors could negatively impact their business were: increased costs for raw materials or goods (24%) labour shortages (24%), higher labour costs (23%), and decreased customer demand (22%).

The most common concern among business owners was increased taxes. A quarter (25%) said that this could negatively impact their business.

Alex Simpson, a partner in the Employer Solutions team, said: “For many businesses, the change to employers’ NIC was a shock. The increase in employers’ rates was expected, but we were not expecting the reduction of the earnings threshold. This is expected to have an impact on the economy over time.

The Office of Budget Responsibility warned that previous NIC increases would lead to a reduction in real wages over the medium-term .'”.

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