Many FDs say NI rise will hit jobs

Link: No special NI grants for hospices

A quarter of companies could be forced to restrict their recruitment policies due to the upcoming increase in National Insurance contributions, according to an exclusive Accountancy Age survey.

This week’s Accountancy Age/Reed Accountancy Personnel Big Question found that 25% of financial directors questioned felt that the 1% NI increase would compel them to put off expansion of the workforce, although two-thirds thought it would have no effect.

Such a move by businesses would send a damning message to chancellor Gordon Brown over his spending plans and economic policy and could further affect his growth forecasts. The survey results come as observers anticipate ‘bad news’ in the budget Brown has still to announce.

One FD said: ‘This increase comes at the same time as significant increases in employer pension contribution costs and it has to be afforded somehow. It is an increase in costs with no compensating increase in income.’ Another commented that his company would be ‘severely hamstrung by this imposition.’

Some respondents had already calculated how many jobs the increase would cost them and felt the increase was a ‘disincentive to employment’. Another suggested that ‘it would be much fairer to increase corporation tax if additional revenues are required’.

Others saw the move as just another barrier to competitiveness in UK industry. ‘On its own it probably doesn’t change any decisions but coupled with higher costs of pensions and the increasing burden of red tape, it makes the UK a less attractive place to do business compared to some other locations in the world,’ said another financial director.

However many weren’t convinced that this rise would materially effect employee numbers. One FD said: ‘Whilst the cost is not good for business, I can’t see it having a bearing on the commercial and operational needs of the business. It is more likely to squeeze salaries rather than employee numbers.’