Is the National Insurance Hike Saving Money or Costing Jobs?

Earlier this year, the government raised employer National Insurance contributions. It was billed as a necessary step to strengthen public finances and support vital services.

But several months on, the question must be asked: is this policy helping the economy or harming it?

Redundancies are rising

Since April, UK businesses have shed an estimated 180,000–185,000 jobs. According to ONS data, payrolled employees fell by 109,000 in just one month (April–May).

The sectors hit hardest?

• Hospitality: down ~83,800 jobs.

• Retail: down ~45,600 jobs.

• Events and exhibitions: seeing reduced hiring and increasing use of temporary contracts.

This isn’t just numbers on a spreadsheet. Behind every redundancy are people, professionals now faced with uncertainty and, in many cases, turning to Universal Credit or other benefits to make ends meet.

A tax rise that pays for itself? Not quite.

The employer NI increase was expected to raise £14–16 billion annually for the Treasury. But as redundancies rise, the government faces higher welfare costs:

• Each unemployed person costs £6,000–£8,000 per year in benefits and lost tax revenue.

• If even 100,000 people are made redundant, that’s £600–£800 million in extra costs – a sizeable chunk of the NI windfall.

This creates what economists call a “fiscal circularity problem” – revenue raised from employers ends up being recycled back into support for those same displaced workers.

The wider impact on business

For many companies, particularly SMEs, the higher NI contributions are effectively a “tax on jobs.” It discourages hiring, pushes some to cut hours or staff, and even accelerates automation plans to reduce headcount.

It also puts downward pressure on wages, which in turn suppresses consumer spending – a key driver of UK economic growth.

What could be done differently?

Some possible mitigations:

• Targeted relief: Reduce employer NI rates for SMEs or labour-intensive industries like care, retail, and events.

• Higher thresholds: Exempt very low-paid employees to protect part-time and entry-level jobs.

• Reinvest wisely: Use the revenue to fund job creation, training, and upskilling to offset job losses.

Why this matters for recruitment

At Amdas Recruitment, we see the real-world consequences every day. Talented marketing, sales, and events professionals are finding fewer opportunities as businesses freeze or scale back hiring.

But businesses that continue to invest in talent, through permanent, fractional, or flexible roles, will be the ones best placed to thrive when the market recovers.

Now more than ever, having the right recruitment strategy is critical.