Press release
30 October 2024
Commenting on changes to employer’s National Insurance contributions, Michael Nicolaides, head of Reward and partner at Deloitte, said:
“For an employee on UK average earnings, the combined effect of the two measures will be an increase of 25% in employer contributions from £3,715 for 2024-25 to £4,655 for 2025-26. The change will have a higher impact for employers in low wage sectors such as hospitality, leisure or care.
“For an employee earning £20,000 per year, employer contributions will increase by 50% from £1,504 for 2024-25 to £2,250 for 2025-26. For those employed in high wage sectors, the effect will be less pronounced. For those earning £100,000 per year, employer National Insurance contributions will increase by 14% from £12,544 for 2024-25 to £14,250 for 2025-26. For small businesses, the increase in the Employment Allowance from £5,000 to £10,500 will reduce the negative impact of these changes.
“Some employers may react to the increase in the cost of employing staff by offering lower pay increases in future years. However, employers in low wage sectors have less scope to defray the increased costs of employment in this way, especially if a large part of their employee population is paid at National Minimum Wage rates, where annual wage increases are statutory. Businesses in low-wage sectors that are unable to absorb the higher costs will come under pressure, especially if they are unable to increase prices to maintain profitability.
“In an international context, the UK’s employer social security rates and average labour costs remain competitive, especially when compared to the other European G7 economies of France, Germany and Italy. However, the UK’s labour productivity remains the lowest amongst these countries. Given that these measures will increase the cost of employing staff in the UK, addressing the challenges of low productivity becomes ever more important. A key difference of the UK social security system is that employer contributions are uncapped, whereas some other European countries apply a cap. This means that a rate increase will have a more significant impact in the UK for high-wage sectors such as financial services.”
“Employers will still be able to make use of a variety of NIC exemptions, for example when employing under-21-year-olds, young apprentices, veterans or hiring new employees in a Freeport or Investment Zone special tax site.”
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Deloitte spokespeople
Deloitte has a range of spokespeople available to comment on today’s Autumn Budget. They can be reached on 0207 303 5054 or one of the following numbers:
• Ian Stewart – chief economist (07774 337 581)
• Amanda Tickel – head of tax policy (07825011798 / 07768178264)
• Rachel McEleney – personal tax (07825011798)
• Mark Outtrim – business rates (07774 337581)
• Ed Rodddis – public sector (07785 682226)
• Toby Price – stamp duty (07990 434703)
• Leila Jiwnani – hospitality and leisure (07824 895798)
• James Clare – carried interest (07586 511104)
• Anthony Massey – energy tax (07774 337581)
About Deloitte
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Deloitte LLP is a subsidiary of Deloitte NSE LLP, which is a member firm of DTTL, and is among the UK's leading professional services firms.
The information contained in this press release is correct at the time of going to press.
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