Prices could increase and staff working hours fall as the rise in employer national insurance contributions (NICs) comes into force on Sunday, ministers have been warned.
From Sunday, the rate of employer NICs will jump 1.2 percentage points to 15 per cent, impacting earnings from £5,000, down from the previous threshold of £9,100.
This tax increase, branded a “jobs tax” by the Conservatives, arrives hot on the heels of a 6.7 per cent minimum wage rise implemented last week.
The combined impact of these changes has sparked concerns within the hospitality sector, with industry leaders warning of a negative impact on job creation.
The increased costs for businesses could lead to difficult decisions, including potential price increases for consumers and a reduction in staff working hours.
Kate Nicholls, chief executive of UKHospitality, said: “The increases to employer national insurance contributions are going to hit businesses and workers right across the UK.
“The impacts will be stark, with hours for staff reduced, trading hours shortened, prices increased and, in the worst case scenario, jobs lost.
“These damaging rises not only hit cherished hospitality venues and communities but the Government’s ambition to get people back into work. It needs sectors like hospitality to create the jobs to get people out of the welfare system but these tax rises will have the opposite effect on job creation.”
Ms Reeves said at last year’s Budget that the move would raise £25 billion per year by 2029, and that she did not “take this decision lightly”.
The Conservatives have accused the Government of “slamming businesses with a punishing jobs tax”.
Pointing also to the tariffs unveiled by US president Donald Trump, shadow business and trade secretary Andrew Griffith said: “British firms are already on their knees — now Labour delivers a one-two punch that could flatten them.
“They don’t understand that it’s business, not big government, that drives growth. If they don’t reverse course fast, working people will pay the price.”
The Liberal Democrats say that the NICs increase will be a “hammer blow” to businesses.
The party’s treasury spokesperson Daisy Cooper said: “In the current climate, it threatens to turn our high streets into ghost towns.
“The Government needs to rethink, scrap the jobs tax and raise this money fairly by asking the big banks and digital giants to pay their fair share.”
Sir Keir Starmer acknowledged earlier this week that the cost-of-living crisis is ongoing and people are feeling the pressure of rising household bills but pointed to the minimum wage increase.
The start of April also saw hikes in council tax and energy bills for households.
He told Sky News: “I think for most people, they would say the cost-of-living crisis is ongoing, and they feel the pressure financially.
“That’s why it’s so important we make good on our pledge that people would feel better off and the national living wage going up today by an average of £1,400 is going to affect millions of people, so in their pay packet this month, and obviously for months to come, they will now be getting more money.”
