The Chancellor is set to introduce a £25 billion National Insurance increase in early April. Economists are cautioning that Rachel Reeves's plan targeting businesses could result in the loss of 85,000 jobs, primarily impacting lower-paid workers in the UK.
The Resolution Foundation has warned of potential job cuts due to upcoming rises in employer National Insurance contributions and minimum wage rates. The think tank predicts a 14% increase in the cost of hiring part-time low-wage employees, which could lead to reductions in staff, hiring freezes, or reduced working hours to mitigate the higher expenses.
Analysts from the Resolution Foundation estimate that around 85,000 jobs could be affected by these changes, with a significant impact on lower-income earners. While companies with higher-paid employees may offset the National Insurance rise with lower wages, this may not be feasible for businesses with employees on the minimum wage.
The impending increase in the minimum wage to £12.21 an hour on April 1, along with the Chancellor's National Insurance adjustment, will intensify financial pressure on businesses. The changes will see employers' National Insurance rates increase to 15%, and the threshold for paying the levy drop from £9,000 to £5,000.
The concerns highlighted by the Resolution Foundation follow Rachel Reeves's recent Spring Statement, which revealed a significant budget shortfall of £14 billion compared to the October projections. Additionally, the £25 billion National Insurance increase is part of the Labour's £36 billion tax hike set to take effect in early April.
The Confederation of British Industry's chief economist, Louise Hellem, criticized the decision to raise National Insurance contributions and the minimum wage, stating that it will negatively impact businesses. She emphasized the substantial cost increase in employment, especially with previous wage bill hikes and impending legislative changes like the Employment Rights Bill.
Overall, the business community is bracing for significant financial burdens as various tax and wage adjustments take effect, with concerns raised over the potentially damaging implications for the economy.