Founders warn of hiring freeze ahead of national insurance hike

A majority of founders are warning they will have to implement a hiring freeze ahead of the employers’ National Insurance Contributions (NICs) increase set to come into effect this spring.

The warning signs follow Rachel Reeves’ announcement in the Budget last month of a 1.2 per cent increase to employers’ NICs, taking the total to 15 per cent.

A survey of 400 business founders has now revealed 59 per cent plan to “hold off on hiring additional staff due to the employers NI increase.”

The increase is expected to see firms pay an additional average of £900 per employee annually to the Treasury.

The survey, conducted by entrepreneurs club Helm, formerly The Supper Club, also revealed 16 per cent of founders plan to cut current staff due to the burdensome increase of costs.

Helm, whose 400 members have a combined annual turnover of more than £8 billion, carried out the polling between November 11-12.

A further 39 per cent of entrepreneurs said they have yet to decide on a response to the policy changes.

“British entrepreneurs put blood, sweat, and tears into keeping their businesses – and the UK’s economy – afloat,” Andreas Adamides, chief executive of Helm, said. 

He added: “After years of struggling with high inflation, tight margins, and a challenging economic environment, this increase in National Insurance could undo the hard work and progress made by scale-ups.

“This policy is a threat to our nascent recovery and should be reversed before it does major damage.”

The stark warnings of the tax hike’s impact follow a number of pleas from industry groups and employers who have said Rachel Reeves’ decision to raise employers’ NICs will be a “big blow” to sectors already suffering from higher costs. 

“At a time when companies are still recovering from recent hikes in corporation tax, this additional NI burden risks undermining growth, job creation, and stability in an already fragile economy,” Vipul Sheth, MD of accountancy specialist Advancetrack, said. 

He added: “Rising employment costs inevitably lead to difficult decisions, meaning businesses may reduce hiring, freeze salaries, or cut back on employee benefits to offset this new financial pressure.”