UKHospitality: Budget to increase cost of employing full-time staff member ‘by at least £2,500’

The trade body says the impact of the Government’s National Insurance rise means that for a typical staff member, aged 21 or older, who’s earning the National Living Wage and working 38 hours per week, National Insurance contributions (NICs) will rise 53.9% from £1,863 to £2,869. 

Chancellor Rachel Reeves confirmed in her Budget on Wednesday (30 October) that NICs for employers will go up from 13.8% to 15% in April next year​​, with the threshold at which businesses start paying National Insurance on a workers' earnings lowered from £9,100 to £5,000.

UKHospitality notes that The Institute for Fiscal Studies has said businesses employing people on the National Living Wage will face the biggest hit from the increase.

Under the NICs changes, UKHospitality's analysis shows the cost of employing a single parent working 9am to 3pm five days a week will increase by £2,100; and a student working 14 hours at the weekend by £1,140.

“The increase to employer NICs and, crucially, the lowering of the threshold left hospitality owners with a sleepless night as they came to terms with the enormous cost they will have to bear from April onwards,” says Kate Nicholls, chief executive of UKHospitality.

“The new cost of employing core members of staff is eyewatering – an increase of at least £2,500 is far, far beyond what anyone’s worst case scenario was.”

As well as the increase to NICs for employers, hospitality businesses will also face higher wage costs​​, with the National Living Wage set to increase by 6.7% to £12.21 per hour; and reduced business rates support, after the Chancellor confirmed the discount for hospitality would be reduced from 75% to 40%, capped at £110,000.

Figures supplied by commercial real estate intelligence firm Altus Group show that restaurants will see their average rates bill rise from £5,051 to £12,122 as a result of the reduction in support, while the average bill for pubs will increase from £3,938 to £9,451.

“The overwhelming feedback from the sector is that this is just not sustainable and will ultimately do real harm to our ability to support employment,” continues Nicholls.

“Hospitality venues will now have to ditch their ambitions to employ more people and do the very opposite – cut hours, scale back recruitment, and, in extreme circumstances, let people go, because they simply can’t afford the scale of these costs.

“We understand the challenging state of the public finances, but balancing the books disproportionately at the expense of high street businesses will ultimately have negative consequences for growth, investment, employment, and our communities.”