Chancellor raises National Insurance for employers which might ‘curb salary growth’

The Chancellor has raised National Insurance for employers which will rise by 1.2% to 15% on all workers earnings above £175 per week, this will start from April 2025.

Rachel Reeves added the threshold for paying contribution will fall from £9,100 to £5,000 per annum.

Reeves told MPs this will raise £25 billion a year, she added, “I know that this is a difficult choice. I do not take this decision lightly.

“We are asking business to contribute more, and I know that there will be impacts of this measure felt beyond businesses, too, as the [Office for Budget Responsibility] have set out today.

“But in the circumstances that I have inherited, it is the right choice to make.”

On Income Tax the Chancellor said, “I am keeping every single promise on tax that I made in our manifesto.

“So there will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions of the previous government.

“From 2028-29, personal tax thresholds will be uprated in line with inflation once again.

“When it comes to choices on tax, this government chooses to protect working people every single time.”

Matt Russell, CEO of employee benefits technology provider Zest, said, “The spike in Employer NI contributions may curb salary growth but employers will take creative steps to unlock cost-effective approaches to reward employees beyond simply raising wages.

“Employee benefits packages are one of the most effective ways that employers can deliver financial support to their workforce, over the last 12 months half (49%) of employers have already increased investment in their benefits package supporting with talent attraction and retention whilst boosting morale and productivity.

“Employees are placing increasing importance on financial support from their employer and aren’t afraid to switch jobs to get the perks that they want – half (47%) now say that a good benefits package is the most important thing they look for in employment. Employers must ensure that not only are they increasing investment in their benefits offering but delivering enhanced value by implementing the support employees are calling for.

“Salary sacrifice is another option employers should be considering to mitigate the impact of rising NI contributions – this approach reduces employee NI payments and benefits both the individual and employer. Our customers are saving over £6.5m each month on employer NI contributions by utilising salary sacrifice which can then be invested back into offering employee the support they need.”