UK Hospitality Sector Faces £1 Billion in New Costs from National Insurance Changes
Industry body warns that new employer National Insurance contributions will threaten jobs and businesses in the hospitality sector.
The UK hospitality sector is set to face an additional £1 billion in costs from April, as 774,000 more workers will become eligible for employer National Insurance contributions (NICs).
UKHospitality, which represents thousands of restaurants, hotels, pubs, cafes, and nightclubs, has raised concerns that the changes, part of the government's budget plan announced by Rachel Reeves in October, could lead to job losses and business closures.
The industry currently employs 1.2 million workers who are not subject to employer NICs, but this number will drop significantly as more workers are brought into the scope of the tax.
In addition to the £1 billion cost, businesses will also face rising wage bills, estimated to reach £2.4 billion in April.Kate Nicholls, CEO of UKHospitality, criticized the changes as one of the most regressive tax increases, stating it would have a “devastating impact” on businesses, workers, and communities, especially those in part-time or low-wage jobs.
She highlighted that the new tax would force businesses to abandon investments, cut headcounts, and raise prices to cover the costs.
To mitigate the impact on low-income workers, Nicholls suggested introducing a lower national insurance rate for those earning between £5,000 and £9,100.The concerns of UKHospitality are shared by other industries, including retailers, who have warned that the planned increase in employer NICs could result in job cuts, recruitment freezes, or higher consumer prices.
In a letter to Reeves in November, major retailers like Tesco, Marks & Spencer, and Next raised alarms over a £7 billion increase in annual costs, which they say would be unsustainable.Despite these concerns, a Treasury spokesperson countered that the majority of employers would either see no change or a reduction in their NICs, and emphasized that the government’s measures would support businesses by providing investment opportunities.
The spokesperson also pointed to business rates relief for retail, hospitality, and leisure sectors as part of the government's broader support strategy.To cope with rising labor costs, some large retailers and hospitality chains, including McDonald's and KFC, have already implemented technology such as self-service tills and app-based ordering systems to reduce staffing requirements.
However, smaller businesses with fewer resources to invest in technology are expected to be disproportionately affected by the changes.
UKHospitality, which represents thousands of restaurants, hotels, pubs, cafes, and nightclubs, has raised concerns that the changes, part of the government's budget plan announced by Rachel Reeves in October, could lead to job losses and business closures.
The industry currently employs 1.2 million workers who are not subject to employer NICs, but this number will drop significantly as more workers are brought into the scope of the tax.
In addition to the £1 billion cost, businesses will also face rising wage bills, estimated to reach £2.4 billion in April.Kate Nicholls, CEO of UKHospitality, criticized the changes as one of the most regressive tax increases, stating it would have a “devastating impact” on businesses, workers, and communities, especially those in part-time or low-wage jobs.
She highlighted that the new tax would force businesses to abandon investments, cut headcounts, and raise prices to cover the costs.
To mitigate the impact on low-income workers, Nicholls suggested introducing a lower national insurance rate for those earning between £5,000 and £9,100.The concerns of UKHospitality are shared by other industries, including retailers, who have warned that the planned increase in employer NICs could result in job cuts, recruitment freezes, or higher consumer prices.
In a letter to Reeves in November, major retailers like Tesco, Marks & Spencer, and Next raised alarms over a £7 billion increase in annual costs, which they say would be unsustainable.Despite these concerns, a Treasury spokesperson countered that the majority of employers would either see no change or a reduction in their NICs, and emphasized that the government’s measures would support businesses by providing investment opportunities.
The spokesperson also pointed to business rates relief for retail, hospitality, and leisure sectors as part of the government's broader support strategy.To cope with rising labor costs, some large retailers and hospitality chains, including McDonald's and KFC, have already implemented technology such as self-service tills and app-based ordering systems to reduce staffing requirements.
However, smaller businesses with fewer resources to invest in technology are expected to be disproportionately affected by the changes.
