Three in five (60%) UK businesses believe the upcoming rise in National Insurance Contributions (NIC) will hurt their ability to hire new employees this year, new research suggests.
The survey, by online marketplace for flexible and temporary work Indeed Flex, questioned 2,000 business managers and recruitment decision-makers. It found that nearly a third (29%) of companies have already slowed or paused recruitment following the Chancellor’s announcement of tax changes on 30 October.
From April, employers’ NIC will increase from 13.8 percent to 15 percent and the salary threshold at which they start paying NIC will fall from £9,100 to £5,000 per year. At the same time, both the National Living Wage and the National Minimum Wage will rise.
The research also noted broader concerns about the UK economy. In January, GDP declined by 0.1 percent, raising fears of a possible recession. One in five (20 percent) businesses identified the country’s economic performance as the biggest challenge to growth and job creation.
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Cost pressures, reduced hiring and higher prices
The survey found that 18 percent of businesses see the upcoming rise in the National Living Wage and Minimum Wage as the biggest barrier to recruitment, while 17 percent pointed to the NIC increase. Inflationary pressures were also cited by 12 percent of respondents as a key concern.
To manage the impact of rising NIC costs, 34 percent of businesses plan to pass some of the expense onto customers by increasing prices. A third (33%) intend to reduce hiring and 28 percent will limit or cut salary increases.
When asked what would improve their ability to hire new staff, nearly a third (31%) of businesses said an improvement in the UK economy would help. Additionally, 15 percent said a reversal of the NIC hike would ease hiring constraints, while 13 percent pointed to increased consumer confidence as a key factor.
Businesses turning to temporary workers
Despite the financial pressures, 51 percent of businesses plan to increase their use of temporary workers as part of their regular workforce over the next year.
Novo Constare, CEO and Co-founder of Indeed Flex, said, that businesses “may have to think outside the box” for recruiting.
“The increase in National Insurance Contributions (NIC) is putting businesses under greater financial pressure and restricting their ability to make new hires, which is why we’re seeing more firms turn to temporary staff,” Constare said. “Temporary workers offer businesses a way to quickly adjust to fluctuating demand without the overhead costs associated with permanent employees.”
Among those seeking temporary staff, more than two-fifths (41%) cited managing seasonal demand as the primary reason, while 34 percent found it quicker and easier to hire temporary workers than permanent employees. The same proportion (34%) said using temporary staff would help them manage rising cost pressures.
