The government is facing increasing pressure to delay the upcoming National insurance rise to help economic recovery. A trade body has warned that many firms will look to reconsider their hiring plans, creating issues for the UK’s post-pandemic economic recovery.
The 1.25% levy is due to come into effect in April 2022, with the aim to raise around “£12bn per annum to help pay for health and social care”. The initial plan is to add the levy to national insurance, however, from April 2023 it will move to an additional tax, warranting a separate line on employees’ payslips.
A recent survey of around 300 manufacturing firms uncovered that three in five employers believe the new levy will have a moderate (33%) or significant (27%) impact on their current hiring plans. In addition, almost three-quarters of businesses stated they would be likely to pass the increase on to their customers through price rises.
Stephen Phipson, chief executive of manufacturers’ organisations Make UK, said the government should avoid “shooting business in the foot” as businesses are entering a key period for the UK’s post-pandemic recovery and are likely to already face escalating costs.
Phipson said, “The proposed increase remains illogical and will be even more ill-timed given how circumstances have rapidly changed since it was announced.” He continued, “The cost burden on business is continuing to escalate and, while some of these increases are due to global events, the government must avoid shooting business in the foot by an entirely self-imposed decision.”
Manufacturers are preparing to face a multitude of challenges in accessing labour, the recent survey revealed, this is due to the increased difficulty in accessing EU workers, an increasingly expensive labour market, a change in attitudes towards flexibility and reduced hours and the increasing number of individuals entering early retirement.
57% of manufacturers have seen an increase in retirement or reduced hours in the wake of the pandemic. “Vacancies within the industry are at a time high, with the highest manufacturing vacancies per 100 employed for 20 years reported by the ONS’s latest employment figures,” its latest Manufacturing monitor report says.
Despite the increasing pressure on the government to delay or cancel the plan, Prime Minister Boris Johnson and Chancellor Rishi Sunak have stated that the plan “must go ahead” in January, adding that “there is no magic money tree”
Many businesses are struggling to recover from the difficulties the pandemic years have brought, and many will continue to struggle as the UK begins to enter the post-pandemic years. If your business is struggling to cope with increasing pressures, our team can help.
If you have looked to adapt your working system to better suit working in the post-pandemic era, our team can help your business navigate changes to contracts and policies to ensure you remain protected. In addition, if the NI increase is likely to affect your business further, our team are here to offer expert advice and guidance to ensure your business follows the correct procedure and course of action.
If you are interested in discussing the impact the health and social care levy may impact businesses further or would like to seek advice on a related topic, feel free to get in contact with our team today.
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