Wages could fall by £27.5billion as employers struggle to cope with a rise in National Insurance, experts warn.
In September the Conservatives announced that the amount of National Insurance paid by businesses and individuals will rise from 12% to 13.25% next April.
The aim is to help fund social care - despite this being a breach of the 2019 Tory manifesto.
The National Insurance hike will appear as a 'health and social care levy' on payslips from 2022.
But the levy means taxpayers who work could be stung twice.
Not only will they be paying around £13billion more in tax a year, but their wages could suffer too.
Sarah Coles, financial expert at Hargreaves Lansdown, said: "The health and social care levy will deliver a double whammy to our pay packets.
"Hard-pressed employers will struggle to cover their share of the levy, so there’s a real risk they’ll cut wages, or at least forgo pay rises. The Office for Budget Responsibility (OBR) reckons we’ll take a £27.5billion hit to our pay packets.
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"At a time when our costs are spiralling out of control, this is the last thing we need. If our pay falls, or fails to rise with inflation, we’re going to end up with horrible holes in our budgets and some really painful financial choices in the years ahead."
This will affect workers in the private sector, who will see a 0.5% average fall in wages, the OBR estimates.
The OBR is the watchdog that monitors government spending.
It thinks wages will fall by around £4.375billion in 2022/23, £5.55billion in 2023/24, £5.68billion in 2024/5, £5.865billion in 2025/6 and £6.075billion in 2026/7.
That’s a total of £27.5billion.
But the 1.25% increase in the levy will not be enough , according to the Institute for Fiscal Studies (IFS) think tank earlier this month.
It said this would need to rise to at least 3.15% by the end of the decade to pay the government's social care bill properly.
Someone earning £30,000 a year will pay £2,451 in National Insurance in the current tax year - 2021/2022.
That is due to rise to £2,707 in the next tax year when the level rises from 12% to 13.25%.
National Insurance is a tax on earnings, paid by both employed and self-employed workers.
You build up contributions during your working life and this then allows you to qualify for the state pension and also certain benefits.
You don't pay National Insurance if you earn less than £184 per week, which is the equivalent to £9,568 each year.
Above that level and you pay 12% - rising from next April.
You have to pay National Insurance if you’re 16 or over and either an employee earning above £184 a week, or self-employed and making a profit of £6,515 or more a year.
Under the current rules, once you reach state pension age, you no longer need to keep paying National Insurance.
