The impact of Rachel Reeves' national insurance tax hike on facilities management

The arrival of April might have heralded a return to sunny weather but for many across the facilities management industry, it was more noteworthy for the introduction of increased national insurance contributions (NICs).

In October’s budget, the Chancellor, Rachel Reeves announced significant changes to national insurance, increasing employer contributions and lowering the threshold at which they begin to be paid.

An additional increase to the national living wage combines to leave employers with a severely impacted bottom line which will transform the way in which they operate and manage labour.

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Many businesses will be forced to consider reducing benefits, cutting hours or imposing pay freezes on management staff to offset the increased cost.

A part-time cleaner who earns £9,520 a year based on 16 hours of work a week will now cost 13% more to employ.

Rain Newton-Smith, CBI Chief Executive, said: “The Chancellor had difficult choices to make to deliver stability for the economy and public finances. A more balanced approach to our fiscal rules which prioritises capital investment should help to unlock private sector investment in our infrastructure and net zero transition over the long-term.  

The Chancellor has been criticised by some for her budget which was deemed to be "anti-business". Photo Credit: World Economic Forum / Sandra Blaser

“This is a tough Budget for business. While the Corporation Tax Roadmap will help create much needed stability, the hike in National Insurance Contributions alongside other increases to the employer cost base will increase the burden on business and hit the ability to invest and ultimately make it more expensive to hire people or give pay rises. 

“Only the private sector can provide the scale of investment required to deliver the government’s growth agenda. To achieve this shared mission of growing our economy sustainably, it’s vital that the government doubles down on its partnership with business to unlock the investment that is needed to drive opportunity around the UK.” 

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There is no question that increased costs will be tough to swallow for employers but there are things that can be done to balance the books and maximise profits.

As discussed previously, the imminent need to assess the effective use of staff comes at a time when emerging technology was already threatening to force employers to do so.

The use of automated systems and artificial intelligence is likely to negate the need to continue to utilise human beings in the way they are currently employed. Changes to NICs could simply accelerate the adoption of such technology.

The changes will likely force those employers who continue to thrive to consider how best to work smarter rather than harder. Can we utilise office space better to reduce the need for security or cleaning, especially given the increase of remote working? Or can we invest in energy saving equipment to reduce energy use and save costs?

The increase in NICs is unlikely to be welcomed by many but the pain will be felt across the board. It will impact how we run operations and how we engage and manage our workforce.

The key to maintaining profitability lies in adapting quickly, identifying opportunities to maximise efficiencies and planning strategically for a new financial landscape.

Featured Image: Crown copyright. Licensed under the Open Government Licence