Some 209 hospitality businesses have given their support to a letter written by trade body UKHospitality and its board members, which claims that the changes to NICs coupled with the rise in national minimum wage levels will cost hospitality £3.4bn a year.
It comes after Chancellor Rachel Reeves confirmed during last month’s Budget 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.
Additionally, the National Living Wage, the minimum wage for those 21 and over, is set to increase by 6.7% to £12.21 per hour, while the minimum wage rate for 18 to 20-year-olds will rise 16.3% to £10 per hour.
The letter describes hospitality as being ‘disproportionately affected’ by the changes to NICs, with the lowering of the threshold bringing in thousands of part-time staff that were previously never affected.
Recent analysis by UKHospitality found that the employment tax measures outlined in the Budget will increase the cost of employing a student working 14 hours by £1,140 per month.
“The changes to the NICs threshold are not just unsustainable for our businesses,” the letter reads.
“They are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon. Unquestionably they will lead to business closures and job losses within a year.
“The threshold change brings many team members into employer NICs for the first time. We estimate the threshold change may be four times the cost of the new headline rate.
“There is no capacity to pass the costs onto customers. Businesses would be reluctantly forced to raise prices by 6-8%, fuelling inflation, yet could not realistically do so as our customers are at the end of their ability to pay more. Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members.”
The letter goes on to suggest two measures that could help mitigate the impact of the employment tax measures.
They include creating a new employer NICs band from £5,000 to £9,100 with a lower rate of 5%; and implementing an exemption for lower band taxpayers working fewer than 20 hours per week.
“Without action, many businesses will be forced to reconsider their growth plans, and many smaller venues may be at risk of closure, risking future job creation in communities up and down the country,” the letter continues.
“We know you are determined to ensure that growth is available to all. Yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.
“We therefore ask that you consider measures to protect businesses who employ lower earners. We understand that these proposals come at an immediate financial cost, but we are absolutely firm in our belief that the lost growth potential which would result from inaction would be substantially more expensive, for the economy, for society and for the public finances.”
