A £2,000 warning has been issued to UK businesses who hire staff. The annual cost of employing workers is set to rise by around £2,000 due to increases in National Insurance contributions and minimum wage, according to new analysis.
The Labour Party government and Chancellor Rachel Reeves’s decision to raise employer’s National Insurance has led to a whopping 60% tax increase for businesses employing the lowest paid. In 2024, an employer paid £1,617 in NICs for each full-time employee on minimum wage. In 2025 they will have to pay £2,583.
Overall, it will cost businesses £2,367 more to employ a full time worker on the minimum wage than it did last year back in 2024. Making it more expensive for businesses to hire low-paid workers means businesses will create fewer positions, entrenching the difficulties faced by those looking to get into the workforce.
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Daniel Herring, CPS Tax and Fiscal Researcher, said: “The more of an employee’s salary is owed in tax – whether paid by the employee or directly by the employer – the more costly it is for businesses to create and sustain jobs.
“Increasing taxes on employment harms businesses and workers alike. By making it more expensive to employ people, the hikes in employer’s National Insurance disproportionately affect the lowest paid or those who are looking to move back into work after being economically inactive.”
Robert Colvile, CPS Director, said: “Labour claims to understand the importance of growth and to have made it a priority. But it was clear from the moment of the Budget that taxing jobs and work would damage the economy. And as this analysis shows, the changes to employer’s National Insurance and the increases in the minimum wage make it disproportionately more expensive to employ those at the lower end of the wage scale.”