Since the announcement in the October budget, companies have been trying to prepare. However, understanding the true cost of this change has left a lot in ignorance about the quantity they will pay.
What has changed?
The change of title is that the employer’s nicks has now increased from 13.8% to 15% and that the secondary threshold will drop from £ 9,100 to £ 5,000 per year. This will mean that you will start paying Nic on the employees’ salary on lower wages than before.
The government has also announced an increase in the employment allowance (from £ 5,000 to £ 10,500) and has removed the eligibility ceiling of £ 100,000, which means that more companies can claim it. However, our data shows that this can only benefit small businesses – which means that most small businesses will pay more.
Who is affected?
If your business has less than seven employees, you may be better thanks to the increase in the job allowance. But for companies above this threshold, costs are starting to increase rapidly.
We know that you are already working with tight budgets, so to help you understand what it will mean for your net profit, we have criticized the figures. By using real -time data of more than 100,000 employee records on our platform, we have estimated the average average cost for small businesses of different sizes and regions.
| Business size | Estimated increased costs (per year) |
| 8-10 employees | £ 530 |
| 11-15 employees | £ 2,412 |
| 16-20 employees | £ 6,245 |
| 21-30 employees | £ 8,472 |
| 31-50 employees | £ 17,967 |
What it means for small businesses
For small larger companies, finding £ 18,000 more per year will be a hard blow. More worrying average companies – which are less likely to absorb these costs – you need to need an additional £ 8,500 per year.
The cost increase is always a concern. These increases (above higher wages) make rental more difficult. And we can see it in our data. According to our smartmatch employment report, employment has contracted 0.3% each month since Nic’s hike announced in October. In February alone, employment dropped by 0.4%, young workers seeing the greatest impact.
In simple terms, companies hesitate to hire, and our economy already feels the consequences.
Stay on top compliance changes
With all these new financial pressures, the last thing you need is more administrator or unexpected expenses. However, Employment Hero is there to make things easier. The fight against compliance changes – like Ni increases – can be difficult when you have a limited time. Employment Hero maintains your payroll and your compliance effortlessly, so you can focus on what really matters – the growth of your business.
* Nic’s costs analysis calculated the impact of the national insurance rate of the new employer, in parallel with the extension of the employment allowance to £ 10,500, by analyzing the results for companies of different sizes in various British regions.
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