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The rates of\u00a0national insurance (NIC)\u00a0paid by employers and employees are all going to rise by 1% from April 2011. People earning less than \u00a320,000 will be immune. Unlike income tax, NIC discriminates between employed and self-employed with lower rates for the self-employed.<\/p>\n
The changes are estimated to yield an additional \u00a36.5 billion between 2011 and 2013. This dwarfs the \u00a3550 million expected to be raised by the much publicized one-off bank bonus tax.<\/p>\n
For example, an employee earning the mean UK salary (full time \u00a331,323), the total cost of employment would be \u00a334,600 in 2009-10. If net pay increased by 2.9% (forecast RPI) for 2011-12 total cost would be \u00a336,428. This means a 5.3% increase in employment costs to allow an inflationary increase in net pay.<\/p>\n
Unemployment is expected still to peak at 3 million (9.6%), so businesses should be encouraged to take on staff, this will certainly not!<\/p>\n
The recent US November unemployment figures<\/a> showed a fall from 10.2% to 10.0% and spurred consumer and investor confidence, although some dismissed it as a blip. Therefore, employment is pivotal to the economic recovery.<\/p>\n Overall, raising NIC will have a detrimental effect on the recovery and may stifle some \u201cgreen shoots\u201d. This is a view shared by many business leaders<\/a> – Richard Lambert, CBI Director-General, said \u201cThe Chancellor has made a serious mistake imposing an extra jobs tax when the economy is still fragile.\u201d and David Frost, Director General of the British Chambers of Commerce, \u201cThe NIC rises mean a brake on employment growth. While everyone understands the importance of restoring the public finances to a sustainable path, a tax on jobs in not the way to do it.\u201d<\/p>\n