IoD: 3 In 10 Firms Will Employ Fewer People As A Result Of National Insurance Increases

Following the announcement on 7th September that the Government is to introduce a new Health and Social Care Levy, to be funded through higher rates of tax levied on National Insurance contributions and dividend payouts, 31% of IoD members expect this to result in them employing fewer people in their businesses.

In the IoD survey of over 600 directors, the overwhelming majority (83%) of business leaders support the need to raise taxes to invest in health and social care. Nevertheless, over two thirds (68%) oppose the higher rates of tax levied on National Insurance contributions and dividend payouts to pay for it.

Commenting on the findings, IoD Chief Economist Kitty Ussher said: “This research is a stark warning to government of the impact that the national insurance rate rise is likely to have on jobs. If, as they intend, 3 in 10 businesses decide to employ fewer people as a result of this tax change, the effect will be felt across the economy just at the time that the furlough scheme is ending.

“Since the March Budget, when the Chancellor announced a future rise in corporation tax, the economic bounce-back has brought in more tax than expected. Rather than raising the cost of taking on staff through higher employers’ national insurance contributions, he should be looking to support the companies currently suffering from skills shortages.

“The national insurance rise is also undoubtedly a significant contributory factor in the sharp decline in economic confidence that we measured in our September Directors’ Economic Confidence Index.”

The IoD’s Directors’ Economic Confidence Index, which measures the net positive level of optimism in the UK economy amongst directors, recorded a value of just under zero (-1%) in September 2021, down from +22% in July 2021.

Full survey results

635 respondents, conducted between 13th-27th September 2021.

On 7th September, the Government announced the introduction of a new Health and Social Care Levy. This will result in higher rates of tax levied on National Insurance contributions and dividend payouts. Which of the following statements best describes how you feel about this? Choose the option that is closest to your view.

We need to raise taxes to invest in health and social care, and this is an acceptable way to do it.	30%
We need to raise taxes to invest in health and social care, but this is the wrong way to do it.	53%
I would prefer no tax rises of any kind even if it means we cannot raise additional funds for health and social care.	15%
Don't know.	2%

The government plans to increase employer national insurance contributions from 13.8% to 15.05%. Thinking about what this change means for your business, will you employ fewer people in the future or will it make no difference?

Yes, it will definitely mean we employ fewer people.	10%
Yes, to some extent we will employ fewer people.	21%
No, we are unlikely to employ fewer people.	19%
The National Insurance change will not make a difference to the number of people we employ.	40%
N/A.	7%
Don't know.	4%