Chancellor Alistair Darling should reduce employers’ national insurance contributions (NICs) to help companies combat the recession.

That is according to the Chartered Institute of Personnel and Development (CIPD), which has revealed that rate cuts would be the most effective way for companies to prevent job losses.

CIPD carried out the research in conjunction with KPMG and when questioned more than a third of employers agreed that a reduction in their NICs would be beneficial.

John Philpott, director of public policy at the CIPD, suggested a two-pronged approach to helping companies weather the downturn.

He said: "Employers in general are urging the chancellor to adjust payroll taxes to support employment, while most manufacturers believe that a short-time working subsidy would enable them to hold on to staff during the recession."

Mr Philpott suggested it was equally important for the government to help companies retain staff as it was to get the unemployed back into work.

Ruth Spellman, chief executive of the CMI, recently stated that managers "strongly favoured tax breaks" as a means of encouraging recovery.