Zarah ChoudharyInsight from The Global Payroll Association (GPA) revealed that more than a quarter (26%) of small and medium size businesses (SMEs) in the UK are considering a reduction in staff numbers as a result of the Autumn Budget.
The rate of employer Class 1 National Insurance contributions will increase from 13.8% to 15% in April 2025.
The National Living Wage, also known as the National Minimum Wage, will go up in April 2025, led by a 6.7 % increase to £12.21 per hour for over-21s.
Both changes are expected to put significant strain on SMEs as the cost of hiring and retaining employees goes up.
When asked whether the changes to National Insurance will put financial pressure on their business, 29% of SME owners responded ‘yes’.
Meanwhile, 18% of SME owners were more concerned about mandatory wage growth than National Insurance changes.
More than a fifth (21%) of business owners said they were now more inclined to push salary sacrifice arrangements such as pension contributions, and 35% were less inclined to approve pay rises beyond the National Living Wage next year.
42% of owners said they were now less inclined to increase their workforce headcount next year.
Melanie Pizzey, CEO and founder of GPA, said: “Due to a huge pressure to honour election promises, the Labour government was unable to directly increase taxes on what they refer to as ‘working people’.
“As such, they have had to look at other ways to increase funding for the public purse, one of which is to increase National Insurance employer contributions.
“The issue here, of course, is that such an increase puts businesses under additional financial strain which will likely result in those same working people losing out on pay rises or losing jobs altogether.
“Add to this an increase to the National Living Wage and suddenly businesses are facing significant cost increases which leaves many wondering how to mitigate this increase.
“While the workforce is, of course, the biggest cost to a business, there are other ways to reduce outgoings, not least through technology integration to streamline processes and maximise efficiency.
“At GPA. we’re seeing this done with great success in payroll departments, and no doubt the same can be done in almost all other corners of business.”
