The government has raised employers National Insurance by 1.2% to 15% in the Autumn Budget.
Chancellor Rachel Reeves said: “I know that this is a difficult choice. I do not take this decision lightly.
“We are asking business to contribute more and I know that there will be impacts of this measure felt beyond businesses, too as the OBR have set out today.
“But in the circumstances that I have inherited, it is the right choice to make.”
At the same time the threshold in which employers start paying National Insurance on each employee’s salary will be cut from £9,100 per year to £5,000.
The alteration should raise £25 billion a year, while it will come into effect in April 2025.
Richard Beresford, chief executive of the National Federation of Builders (NFB), felt the change could hit the UK’s housebuilding levels.
He said: “The government’s target to deliver 1.5 million homes is now at a considerable risk due to the increase in Employer National Insurance contributions.
“This announcement will hinder the industry’s ability to take on and train new staff and support the next generation of skilled workers.
“While some may point to planning reforms as the solution, those reforms have not yet been implemented, and it will take years before new projects avail of them.”
Richard Pike, chief sales and marketing officer at Phoebus, added that the change will “also have an impact on the ability of house builders to recruit the staff necessary”.
At the same time Reeves increased the Employment Allowance from £5,000 to £10,500, in a bid to help the smallest companies.
Prior to being elected Labour pledged not to increase the National Insurance paid by ‘working people’, yet some argue that taxing employers will impact working people indirectly.
Lindsay James, investment strategist at Quilter Investors, said: “This is a significant lever to pull, but comes with many risks.
“Businesses may now scale back pay increases or hiring plans, which goes against the mission for growth.
“The Chancellor has tried to exempt very small businesses from this increase, but the vast majority of small and medium enterprises in the UK will be hit.
“Coupled with the hit on business relief, small companies may not appreciate the plans put in place by the Labour government.”
