Three in five (60 per cent) of UK businesses say the upcoming rise in National Insurance Contributions (NICs) will reduce their ability to make new hires this year, according to new research.

A survey carried out by Indeed Flex, the online marketplace for flexible and temporary work, of 2,000 business managers and recruitment decision-makers has revealed that nearly a third (29 per cent) of firms have slowed down or paused recruitment since the Chancellor announced the tax changes on 30 October last year.

Starting from April, employers’ National Insurance Contributions (NIC) will rise from 13.8 per cent to 15 per cent, and the salary threshold at which they begin paying NIC will decrease from £9,100 to £5,000 annually. At the same time, both the National Living Wage and the National Minimum Wage are set to increase.

Businesses are also grappling with the UK’s poor economic performance, with a 0.1 per cent drop in GDP in January sparking fears of a potential recession.

The survey shows that 20 per cent of firms identify the country’s “poor economic performance” as the greatest obstacle to business growth and job creation.

Nearly one in five (18 per cent) businesses say the upcoming rise in the National Living Wage and Minimum Wage is the biggest barrier to recruitment, while 17 per cent pointed to increases in their NICs, and almost one in eight (12 per cent) cited inflationary pressures.

To manage the impact of higher NIC payments, a third (34 per cent) of businesses plan to pass some of the costs onto customers by raising prices, while 33 per cent intend to reduce hiring, and 28 per cent will limit or cut salary increases.

When asked what would improve their ability to make new hires, nearly a third (31 per cent) of businesses said an improvement in the UK economy. Meanwhile, 15 per cent said they would like to see a reversal of the NIC hike, and 13 per cent said increased consumer confidence would help support expansion and recruitment plans.

While many businesses may pause hiring, 51 per cent plan to increase their reliance on temporary workers as part of their regular workforce over the next 12 months.

Among those looking to hire temp staff, more than two-fifths (41 per cent) cite managing seasonal demand and busy periods as the primary reason, while a third (34 per cent) find it quicker and easier to hire temporary workers compared to permanent employees. The same proportion (34 per cent) also plan to use temp staff to help manage rising cost pressures.

Novo Constare, CEO and Co-founder of Indeed Flex said: “As businesses face rising costs and economic uncertainty, many are having to think outside of the box when it comes to recruitment.

“The increase in National Insurance Contributions (NIC) is putting businesses under greater financial pressure and restricting their ability to make new hires, which is why we’re seeing more firms turn to temporary staff.

“Temporary workers offer businesses a way to quickly adjust to fluctuating demand without the overhead costs associated with permanent employees. This flexibility allows companies to scale their workforce up or down based on needs, whether to handle seasonal peaks or unexpected increased demand from customers.

“Moreover, temporary workers can be onboarded more quickly than permanent employees, making them an attractive option when speed and efficiency are essential. 

“Ultimately, the rise in NIC costs underscores the need for adaptable, cost-effective staffing solutions. Temporary workers allow businesses to respond to immediate needs while keeping financial commitments in check, offering a vital strategy for surviving and thriving during uncertain times.”

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