Employers’ NIC
There is ongoing speculation about potential increases in employers’ National Insurance Contributions (NICs). While the government is under pressure to raise additional revenue to address fiscal challenges, increasing employer NICs has been floated as one option, particularly as the government has pledged not to raise income tax, VAT, or employees’ National Insurance for individuals.
However, concrete details on employer NICs changes have yet to be confirmed. Some economists have suggested that targeting employers’ NICs could be seen as a way to increase tax revenues without directly increasing the tax burden on individuals. Such a move could be justified as part of Labour’s broader strategy to balance revenue generation with a focus on protecting the lower and middle-income earners.
On the downside, raising employers’ NICs could increase costs for businesses, which may result in lower levels of hiring or reduced investment in growth. Given the emphasis on stimulating economic recovery and investment, the government would need to carefully weigh these potential economic consequences.
While not confirmed, the idea remains under consideration as the government looks to close the fiscal gap while maintaining its election promises.
Wage rates
Additionally, an announcement on increases in the National Living Wage (NLW) and National Minimum Wage (NMW) rates are also expected. Again, this would increase employment costs for industries that are already struggling to maintain profitability.
From April 2025, the NLW and NMW are projected to increase as follows:
- The NLW (for workers aged 21 and over) is expected to rise to £12.10 per hour, with a lower estimate of £11.82 and an upper estimate of £12.39. This increase reflects the aim to keep the NLW at two-thirds of median earnings, aligning with inflation and wage growth projections for 2025
- For younger workers and apprentices, the NMW will also see adjustments, although specific rates for those groups are yet to be confirmed. The government’s focus remains on increasing these rates without harming employment prospects for younger workers
Summary
Rachel Reeves has a difficult if not impossible task to perform. There seems to be a need to plug holes in the government’s finances and at the same time, offer incentives to stimulate growth.
We will see exactly how she intends to perform this balancing act on 30th October. Watch this space