Nearly half of UK businesses are rethinking their recruitment plans in response to higher employment taxes and labour costs.
According to new research by recruitment company Reed, 46% of companies said the recent rise in National Insurance contributions (NICs) would impact their hiring decisions.
From 6 April, employers began paying NICs at a higher rate—up 1.2 percentage points—while the threshold at which payments began fell to £5,000. These changes are expected to add pressure to labour-intensive sectors, such as hospitality and retail, which often rely on part-time staff and tight margins.
The survey, which polled 254 businesses representing more than 260,000 employees, found that the financial impact could be significant. On average, respondents predicted a 29% drop in annual profits due to the NIC increase.
Many businesses are already adjusting. Over a quarter (27%) said they were postponing or cancelling recruitment plans. Others are taking further action to manage costs: 19% are delaying or cancelling salary reviews, and 16% are making redundancies.
Reed said the findings highlight growing concerns about the affordability of maintaining or expanding workforces under the new tax rules. With employers facing increased financial pressure, businesses must make difficult decisions that may affect jobs, pay, and future growth.
While the changes are designed to support public finances, business leaders have called for further support to offset the impact on employment and ensure sectors like hospitality and retail can recover and thrive.
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