A third of business owners have said they plan to cut more jobs after being hit by higher national insurance contributions (NICs) in April, according to new research.
Many companies have also suggested they will cut back hours, freeze pay and hike prices in order to help cover increased tax payments.
S&W’s business owners sentiment survey revealed around 20% of those quizzed said they have already reduced their staff numbers as a “direct result” of the NICs changes which came into effect in April.
Last year, Chancellor Rachel Reeves announced in her autumn budget that employers’ NICs would rise from 13.8% to 15%, while the threshold at which firms would start paying also increased.
The increase came in at the same time as the jump in the national living wage and reduced business rates relief for some firms.
The survey found 33% of business owners said they were still planning further cuts to staff numbers after feeling the impact of the tax increase.
Firms said they were also looking to a series of other measures in order to offset the jump in their operating costs.
The survey of 500 UK business owners with turnovers of £5 million upwards also showed 46% of those surveyed said they were planning further price increases as a result.
Meanwhile, 35% of business owners said they planned to reduce staff hours and 29% said they were looking at freezing pay.
It comes as firms highlighted higher commodity and energy costs, as well as disruption from wider macroeconomic uncertainty.
Claire Burden, partner in consulting at S&W, said: “Businesses face considerable challenges in the current economic climate and many owners are having to make difficult decisions to stay afloat.
“Given that salaries represent a considerable proportion of the overall cost base for most businesses, it is to be expected that many are looking closely at headcounts in response to the increased national insurance costs.”
Alex Simpson, partner in employer solutions at S&W, said: “For most businesses, the extent of the employers’ NIC change was a surprise.
“We anticipated an increase in the employers’ rate, but the additional reduction to the earnings threshold was not expected and is expected to have a dramatic impact over time.”
A Government spokesman said: “We are a pro-business government. We are protecting the smallest businesses from the employer national insurance rise, shielding 250,000 retail, hospitality and leisure business properties from paying full business rates and have capped corporation tax.
“We delivered a once-in-a-Parliament budget last year that took necessary decisions on tax to stabilise the public finances, including the NHS which has now seen waiting lists fall five months in a row.
“We are now focused on creating opportunities for businesses to compete and access the finance they need to scale, export and break into new markets.”
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