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Employer National Insurance, Not Pay, Is Cutting Payroll Jobs

ended 22. July 2026

For a small employer the squeeze this year is not the wage on the payslip, it is the cost of carrying it. ONS figures published on 21 July 2026 show an early estimate of 30.3 million people on UK payrolls in June, 71,000 fewer than a year ago, while median monthly pay rose 4.3% over the same period to £2,632. Paare rising sharply while headline rates barely move. Is fiscal drag a legitimate way to raise money, or a stealth tax rise that dodges accountability? 2. With Inheritance Tax at a record and business taxes up 15 per cent, who is hit hardest by frozen thresholds, and is it fair that a bigger bill lands on people who did nothing differently? 3. What should ordinary families and small firms do now to plan around frozen thresholds rather than wait for the next Budget?are rising sharply while headline rates barely move. Is fiscal drag a legitimate way to raise money, or a stealth tax rise that dodges accountability? 2. With Inheritance Tax at a record and business taxes up 15 per cent, who is hit hardest by frozen thresholds, and is it fair that a bigger bill lands on people who did nothing differently? 3. What should ordinary families and small firms do now to plan around frozen thresholds rather than wait for the next Budget?are rising sharply while headline rates barely move. Is fiscal drag a legitimate way to raise money, or a stealth tax rise that dodges accountability? 2. With Inheritance Tax at a record and business taxes up 15 per cent, who is hit hardest by frozen thresholds, and is it fair that a bigger bill lands on people who did nothing differently? 3. What should ordinary families and small firms do now to plan around frozen thresholds rather than wait for the next Budget?y up and jobs down can both be true at once, because the cost of employment, not the wage, is doing the cutting. Since 6 April 2025 employers have paid 15% National Insurance on earnings above just £5,000, down from £9,100, and the National Living Wage rose to £12.71 an hour in April 2026. So a higher wage is being met by holding or shedding headcount, and it is the lower-paid, part-time roles that no longer clear the maths. Eligible small firms can offset some of the bill with the £10,500 Employment Allowance, but the person really caught is the Saturday assistant or the extra pair of hands whose few hours no longer add up. 

  1. ONS shows pay rising but payrolls falling. Is the real driver the pay rises workers see, or the employer tax and wage costs they never see?
  2. With employer National Insurance now biting from £5,000 and a higher National Living Wage, who is hit hardest, and is it fair that the lowest-paid, part-time roles are the first to go?
  3. What should a small employer do now to keep people on the books, from the Employment Allowance to how they structure hours? Do you have a client whose hiring plans this has already changed? If so, please give as much colour and detail as possible.

6 responses from the Newspage community

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Harvey DhillonVerified
Founder & CEO at Zmartly
The problem was never the pay rise. It is the cost of carrying it. Since April 2025 employers pay 15 per cent National Insurance on earnings above just £5,000, down from £9,100, so the bill for a part-time worker who once cost almost nothing in employer NIC now starts far sooner. Add a National Living Wage of £12.71 an hour from April, and the fully loaded cost of a low-paid role has jumped even where the headline wage barely moved. Pay went up and jobs went down because the cost of employing someone, not the wage, is doing the cutting. The person who loses out is not the highly paid worker, it is the Saturday assistant or the extra pair of hands on a quiet shift, whose few hours no longer clear the maths. ONS figures show 71,000 fewer people on payrolls than a year ago. If you run a small firm, check you are claiming the £10,500 Employment Allowance before you cut a single hour. The next jobs to go are the ones that gave people a first step in.
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Kate UnderwoodVerified
Founder & Chief People Strategist at Kate Underwood HR and Training
Pay up, jobs down. Both true, in the same breath.

It isn't the wage breaking small employers; it's the cost of carrying it. Employer National Insurance now bites from £5,000, down from £9,100. The National Living Wage is £12.71. So the Saturday assistant, the extra pair of hands, the few hours that just about worked, suddenly don't.

Fair? The lowest-paid, part-time role goes first. Not because the boss turned heartless, but because the maths stopped adding up. The £10,500 Employment Allowance softens the blow; it doesn't fix the sum.

We taxed the job, then act shocked the job vanished.

Small employers, don't wait for the Budget. Claim the allowance. Know your true cost per hour. Guard the people you can't afford to lose.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
This isn't "rocket science." If you increase the cost of employing someone, you increase unemployment. UK businesses have been hit hard with billions in extra taxes and costs, including a rise in the National Minimum Wage to between 70% and 82% of the average graduate or entry-level salary. For lower-earning or part-time roles, this tax hit makes marginal hours financially unviable. Consequently, weekend staff, part-timers, and entry-level workers bear the brunt as small firms’ trim headcount to protect margins. While the £10,500 Employment Allowance offers micro-businesses temporary relief, mid-sized teams exhaust it quickly. In response, small employers are consolidating fragmented part-time hours into fewer full-time roles, using salary sacrifice schemes to lower gross exposure, and automating workflows rather than hiring extra hands. The wage floor rises. The doors to entry-level employment keep closing.
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Samuel Mather-HolgateVerified
Managing Director & IFA at Mather and Murray Financial
Employer National Insurance is a jobs tax, and this one has been dressed up as fiscal responsibility while doing real damage on the shop floor. The payslip may show wages rising, but the employer sees the full bill: higher pay, higher National Insurance, and a lower threshold at which the tax kicks in. That is why pay can rise while payrolls fall.

The cruelest part is that the first roles to fail the maths are often the very ones politicians claim to protect: part-time shifts, Saturday jobs, entry-level posts and the extra pair of hands a small firm would have hired if the state had not made employment so expensive.

This is not pro-worker. It is anti-hiring. Small employers should check their Employment Allowance position, review hours carefully and plan staffing around the true cost of each role. But let’s be honest: no spreadsheet can fully protect firms from a tax raid on jobs.
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Paul DenleyVerified
CEO at Oakham Wealth Management
For a small employer, the real pressure this year isn't what staff are paid, but what it now costs to employ them. Higher wages are welcome, but with the National Living Wage rising just as employer NI starts biting at £5,000, the maths on marginal hires has shifted sharply.

The cruel irony is that the jobs most exposed are exactly those policy is meant to protect: entry-level, part-time and weekend roles where a few hours no longer justify the cost.

Small firms should make full use of the Employment Allowance and review how they structure hours, but optimisation only goes so far. We're already seeing employers hesitate before replacing leavers or creating junior roles. If jobs are disappearing while pay climbs, the honest place to look is the cost of employment, not just the wage.
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Debbie PorterVerified
Managing Director at Destination Digital Marketing
Voters making decisions on headlines such as ‘raising minimum wage’ quite rightly celebrated as they put their cross in the voting box. It makes total sense to give more to those who have less after all. It also makes sense to draw down from the profits of huge businesses who profit largely from low-paid workers, but the missing detail is crucial to understanding why suddenly jobs at the bottom of the market are disappearing. 99.9% of the business community in the UK are SMEs, of which 95% are micro businesses (under 10 employees). Together they employ over 13 million people, including young people that are now showing up in the stats as rising numbers of NEETs. The small businesses who keep this country going by providing entry level jobs can no longer afford to do so, most especially when coupled with all the costs to business that are hidden from employees such as pensions and NI contributions. Whilst trying to chase whales, the government have destroyed a lot of minnows.