Jessica BirdIn the lead up to the Autumn Budget, Helen Morrissey, head of retirement analysis at Hargreaves Lansdown says a potential hike to employer National Insurance (NI) contributions could lead to lower wages due to the impact on costs.
Morrissey said: “The Budget is just over two weeks away and employers are gearing up for a Hallowe’en horror show if employer National Insurance rates get hiked.”
One option touted is that the headline rate of 13.8% on earnings above £175 per week could be increased, which Morrissey argued would push up wage bills.
Alternatively, NI could get levied on employer pension contributions – a cost of up to 13.8%, which she referred to as “damaging.”
Morrissey said: “Even if the Government didn’t opt to impose the whole 13.8% on contributions it would still hurt.
“If, for example, it added employer NICs of 2% on contributions, it would add £17.25 per year to the cost of paying into the pension of someone earning £35,000 per year and receiving the auto-enrolment minimum of 3% from their employer.
“Spread that across a couple of hundred employees then the figures get big fast.
“The concern is that employers may look to mitigate these costs with smaller wage increases, which will impact people’s ability to meet their day-to-day living costs.
“There’s also the potential that it will deter them from boosting their contributions beyond auto-enrolment minimums.”
Morrissey said that a shift to a 5% employer contribution could cost an extra £11.50 (£28.76) per year per employee earning £35,000 per year.
She said: “It’s a shift that we are concerned could prove unaffordable for many businesses and this will impact their workers long-term too.
“It will also make it less likely that employers will offer salary sacrifice arrangements on their workplace pensions due to the cost.
“In the Labour party manifesto, it stated it would not raise national insurance for working people.
“Looking to hike them for employers rather than employees may look like it’s hitting this brief, but it’s a move that will impact businesses and their workers alike and bring future challenges should government want to boost auto-enrolment minimums in the future.”
