A significant number of hospitality businesses are preparing to cut jobs in response to an upcoming increase in employer National Insurance contributions, which will take effect in April.
A recent survey by the British Beer and Pub Association, the British Institute of Innkeeping, Hospitality Ulster, and UKHospitality revealed that 70% of hospitality employers anticipate reducing staff due to escalating employment costs.
In addition, 60% of those surveyed indicated they would cancel planned investments, prompting industry leaders to urge the government to reconsider the tax increase announced in last October’s Budget.
Additional challenges
The findings also highlighted further challenges for the sector: 29% of businesses plan to shorten trading hours, 25% report having no remaining cash reserves, and 15% say they will be forced to shut down at least one location to stay afloat.
Trade bodies have warned that increasing the financial burden on businesses could stifle economic growth and lead to job losses.
“At a time when hospitality has been one of the top contributors to economic growth, the last thing the government should be doing is piling on costs that will impact employment and cut off our ability to grow,” the trade bodies said.
Industry leaders, including Kate Nicholls, CEO of HospitalityUK, have called on the government to delay these “regressive changes” and reconsider the new employer NIC threshold. According to HospitalityUK, the adjustment will impact one in five workers in the sector. Nicholls has proposed alternatives, such as introducing a 5% NIC rate for earnings between £5,000 and £9,100.
Despite widespread concerns, the Recruitment and Employment Confederation data indicates that job postings have been rising since June 2024.
The upcoming changes will see employer National Insurance contributions rise from 13.8% to 15%, while the threshold at which contributions begin will drop from £9,100 to £5,000. Businesses fear these measures could further strain an industry grappling with financial pressures.