The added burden of rising NI contributions

An increasing National Insurance bill is adding to the many challenges faced by businesses in attracting and retaining top talent, new analysis suggests.

Analysis of government data by independent consultancy Broadstone reveals that the NI contributions made by employers rose by 42 per cent over the five-year period to March.

The total cost of NIC to UK employers was £103bn in 2022/23 according to the latest HMRC tax receipts data, up from £72bn in 2017/18. This comes at a time when increasing inflation has also seen wage bills increase.

Sharp increases in NIC receipts in the past two years – 11 and 15 per cent respectively – have coincided with wage increases of 7 per cent per year.

Paul McGuckin, Head of EB Distribution at Broadstone, which has more than 500 consultants advising employers on the best way to attract and retain talent, says employers are looking to improve their broader benefits package to offset the salary and associated NIC increases.

“Employers are facing a difficult environment, inflation is pushing up operating costs and salaries, at the same time as the tax burden is increasing.” He said. “NIC costs are particularly punishing for businesses that are having margins squeezed as they are a tax on employment, not profit,” he said.

“As a result, we are seeing lots of interest in salary exchange programmes that can help employers offer valued benefits, like healthcare or wellbeing initiatives, while reducing the cost of NICs for both them and their workforce. Engagement is key when it comes to uptake, so employers are often using technology like flexible benefits portals to manage the employee communications.”