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Employer NI increase and HR legislation means "many business owners will have to think twice about hiring"

ended 28. October 2024

Accountants, tax and financial experts have warned that if employers' NI is increased in this week's Budget then that, coupled with the Workers' Rights Bill, could see “SMEs and indeed larger businesses abandon employing people” — and  “slow growth and affect stability across sectors”. Add potential changes to Capital Gains Tax rate and the removal of Business Asset Disposal Relier into the mix and one concluded: “Business owners may wonder if their blood, sweat, and tears — as well as the years of reinvesting and often minimal pay — are worth the risk.” Their views are below.

3 responses from the Newspage community

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Bev Wakefield
Director at Vibrant Accountancy Limited
The government needs to carefully consider the impact of their decisions on small businesses. These companies, employing fewer than 50 people, account for 48% of the total UK workforce. With proposed increases in employer National Insurance (NI) contributions and new HR legislation on the horizon, many business owners will have to think twice about hiring, which could slow growth and affect stability across multiple sectors. Plus, potential changes like a higher Capital Gains Tax rate and the removal of Business Asset Disposal Relief raise serious concerns. Business owners may wonder if their blood, sweat, and tears—as well as the years of reinvesting and often minimal pay—are worth the risk. Layer this with ongoing challenges from interest rates, Covid, and Brexit, and it feels like SMEs are being hit from every angle. These decisions have real consequences, and it’s vital that policymakers recognise the impact on the backbone of our economy.
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David Stirling
Independent Financial Advisor at Mint Wealth
This could well sound the death knell for some beleaguered small businesses who seem to be facing one challenge after another since Covid. What would attract an SME to take a chance recruiting new staff with a potential increase in National Insurance along with increased protection from the Workers' Rights Bill? A number of businesses that I have spoken to are already teetering with corporation tax hikes and the uncertainty and malaise generally in the economy. The impending Budget has everyone twitchy and if these rumours are true it's hard to work out how this Government intends to fuel economic growth with this move - SMEs will fail and unemployment will rise.
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Rebecca Seeley Harris
CEO at Re Legal Consulting
SMEs are already in a precarious position but a raise in employer NICs will make things even worse. There is already a proposed admin burden on employers from the Employment Rights Bill, including day-one rights, single worker status and zero-hours contracts. So, the unintended consequences of all this could be that SMEs and indeed larger businesses abandon employing people. If they turn to the off-payroll market this is already fraught with difficulty and uncertainty because of the tax law on IR35 and the off-payroll working rules. Many may decide to use umbrella company workers instead. This is still an unregulated market and Labour has, so far, ignored this sector of the workforce, not treating them as workers. They could have been included within the Fair Work Agency, but there is no indication that Labour wants to protect these workers. With the PM's comments on who a working person is, Labour is showing that they have a lot to learn as far as business is concerned.