NI increase sparks recruitment rethink among brokers ‒ analysis

NI increase sparks recruitment rethink among brokers ‒ analysis


This week the government announced an increase to National Insurance in the form of a Health and Social Care levy, with the intention of raising funds for both the NHS and addressing the social care crisis.

Individuals and businesses alike will have to pay an additional 1.25 per cent in tax as a result of the move.

However, the tax rise has provoked a lot of criticism, particularly from business groups who have warned that it will dent recruitment.

Mike Cherry, national chair of the Federation of Small Businesses said the “regressive tax” would “stifle recruitment, investment and efforts to upskill and improve productivity in the years ahead”.


Putting the brakes on recruitment

Kev Tilley, managing director of Mortgageable, said there was no question that the increase in National Insurance meant his firm would be reviewing its growth and recruitment plans.

“They are an additional cost we will need to account for and at present we are not entirely sure how strong the market will be when they come into force from April 2022, but it’s certainly something we are hesitant about,” he said.

Tilley noted that he was hopeful the market would still be going strong, meaning there would be no reason to make any changes to the firm’s plans, but cautioned: “Since this is a moving picture, it’s difficult to be certain about exactly how we will approach the situation”.

Rhys Schofield, managing director of Peak Mortgages and Protection, said his firm had recruited significantly over the past year, but admitted the added cost of taking on a new employee “will probably make us a bit less gung ho in future”.

He continued: “The government seems to have scored a massive own goal with this one. A tax on working hard and creating jobs in what feels like a delicately balanced economy, all whilst leaving the bigger prize of unearned wealth well alone seems  a bit foolish.”

And Dominik Lipnicki, director of Your Mortgage Decisions, commented: “The 10 per cent increase of National Insurance for employees is bad enough but adding the same to employers will mean lower wages and less recruitment at a time when many firms are trying to rebuild post-Covid.”


Employed vs self employed

Andy Wilson, founder of Andy Wilson Financial Services, said his firm was a relatively small business, with just two directors and two mortgage advisers. As both advisers are self-employed they will be responsible for their own National Insurance contributions, so there should not be a direct impact.

He added: “While the directors’ employed incomes are deliberately held down to remain below the lower National Insurance threshold, like most company directors, the increase in the rate applied to dividends will hit myself and the other director. However, we are lucky to have weathered the Brexit and Covid storms and still be in a healthy business, so we can easily absorb this.”


We still want to grow

Others argued that while the increase wouldn’t impact their own recruitment plans, the move suggested that small businesses were undervalued by those in charge.

Wesley Ranger, director at Willow Private Finance, noted that his firm had taken on three new members of staff this year, and said that there were ambitious growth plans in place after the business had traded well despite the difficulties of the pandemic.

He added: “While the increase in National Insurance won’t prevent us pursuing these plans, it is yet another indication that the government’s focus isn’t on supporting SMEs, more the continuum of corporate tax avoidance. 

“SMEs are the backbone of the UK economy, providing employment, trading receipts and various tax income for the government. This is just another example of the government carrying out a raid on the SME cash cow.”

James McGregor, director at Mesa Financial, said the National Insurance change would not affect his firm’s recruitment plans, but warned that it was those on the lowest incomes who were likely to feel the rise the hardest. 

Sarah Parkin, director and adviser at Holly Beck Finance, agreed that the increase was unlikely to make a big difference, costing around an extra £800 a year, so would not impact its growth plans or recruitment.

She added: “We expect to expand our workforce over the coming years and like all firms will have to factor in these changes and costs when pricing our services.”