Three in ten firms to employ fewer people as result of NIC increase, IoD finds

11 Oct 2021

A survey carried out by the Institute of Directors (IoD) has found that three in ten businesses plan on employing fewer people as a result of the increase in national insurance contributions (NICs).

Last month Prime Minister Boris Johnson announced plans to supply an additional £12 billion per year for health and social care, funded by a new 1.25% Health and Social Care Levy.

The UK-wide Health and Social Care Levy will be based on ringfenced NICs which already help to partly fund the NHS. A transitional increase to the main and additional rates of NICs will take effect from 6 April 2022 and will last during the 2022/23 tax year only: at this time, NICs for working age employees, the self-employed and employers will increase by 1.25% and will be added to the existing NHS allocation.

The IoD survey revealed that 83% of business leaders support the need to increase taxes to invest in health and social care. However, 68% oppose the higher tax rates levied on NICs and dividend payouts.

Commenting on the issue, Kitty Ussher, Chief Economist at the IoD, said: 'This research is a stark warning to government of the impact that the national insurance rate rise is likely to have on jobs. If, as they intend, three in ten businesses decide to employ fewer people as a result of this tax change, the effect will be felt across the economy just at the time that the furlough scheme is ending.'