Three in ten companies will employ fewer people as National Insurance increases

8th October 2021

Three in ten companies will employ fewer people as a result of National Insurance increases according to new research by the Institute of Directors (IoD).

Following the announcement on 7th September that the Government is to introduce a new Health and Social Care Levy, to be funded through higher rates of tax levied on National Insurance contributions and dividend payouts, 31% of IoD members expect this to result in them employing fewer people in their businesses.

The IoD survey of over 600 directors, the overwhelming majority (83%) of business leaders support the need to raise taxes to invest in health and social care. Nevertheless, over two thirds (68%) oppose the higher rates of tax levied on National Insurance contributions and dividend payouts to pay for it.

Commenting on the findings, IoD Chief Economist Kitty Ussher said “This research is a stark warning to the government of the impact that the national insurance rate rise is likely to have on jobs. If, as they intend, 3 in 10 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.”

“Since the March Budget, when the Chancellor announced a future rise in corporation tax, the economic bounce-back has brought in more tax than expected. Rather than raising the cost of taking on staff through higher employers’ national insurance contributions, he should be looking to support the companies currently suffering from skills shortages.”

“The national insurance rise is also undoubtedly a significant contributory factor in the sharp decline in economic confidence that we measured in our September Directors’ Economic Confidence Index.”