Firms scale back recruitment plans in wake of National Insurance hike

Nearly half of all companies across the UK are scaling back recruitment plans because of the hike in employers’ National Insurance which comes into effect on April 6th, according to a new poll by Reed. The survey found that 46 per cent of firms said that recruitment decisions would be impacted due to the tax increase, with many reporting that they were already not hiring or postponing recruitment. Reed say the findings demonstrate the negative impact the increase in employer’s NI is having on the labour market, which has already seen vacancies fall for a record period.

The poll commissioned by Reed.co.uk, which deals with over 30 million job applications a year, said that on average, respondents estimated that their annual profits would decrease by 29 per cent after the NI increase had been implemented. Almost two thirds of respondents – 64 per cent – said they were concerned (either very or quite) about the upcoming changes to NI contributions.

Of those companies which said they were not hiring or had delayed hiring at the moment, 22 per cent said they had limited budgets due to the upcoming increase in NI contributions. 18 per cent stated that economic uncertainty around the company’s future was acting as the biggest drag on hiring.

Specifically, the increase to NI contributions is causing 27 per cent of businesses to postpone or cancel hiring new employees, with 16 per cent saying they were making redundancies and 19 per cent reporting that they were postponing or cancelling salary reviews.

Just over a quarter (27 percent) said they were now more focused on employee retention, while 22 per cent said they were having to make budget cuts in certain departments as a result of the change.

The survey of 254 companies representing over 260,000 employees identified stark regional differences. In London, 60 per cent of companies say that the NI increase is impacting their hiring decisions in 2025 versus 38 per cent of those from outside London saying the same. Similarly, 24 per cent of businesses from London said they were already making redundancies in response to the NI increase, versus 12 per cent of those from outside London saying they were doing the same.

The rise in the national minimum wage is another challenge for companies, according to Reed. Overall, 26 per cent said they had paused hiring because of the upcoming increase in minimum wage and 35 per cent said it had significantly affected their ability to hire. Some 47 per cent said they would find it necessary to increase pay to better off workers, because of the minimum wage increase at the lower end of the pay scale.

This effect was bigger in London, where 58 per cent said the increase in pay at the lower end of the wage scale made them feel it necessary to increase pay to better off workers – versus 41 per cent of businesses from outside London saying the same.

Reed believes that despite the challenges in the jobs market, there are still opportunities for jobseekers to get ahead. Workers should consider training and investment in their skills, and in particular technology, as this is an area which will be most highly-prized by employers as AI transforms many workplaces.