Business groups have warned the government not to make any further statutory increases to the cost of employing staff which could jeopardise recovery in the jobs market.
The Chartered Institute of Personnel and Development (CIPD) and the British Chambers of Commerce have sent a joint letter to Lord Mandelson, secretary of state for business, cautioning him about the consequences of the 1% increase in employers’ national insurance contributions (NICs) scheduled for April 2011.
The organisations warn that more than one in 10 employers (12%) intend to recruit fewer staff as a result of the planned hike, while 8% would make jobs cuts.
They also suggest a freeze in the youth and development rates of the national minimum wage (NMW) to avoid thwarting measures to combat rising youth unemployment.
Dr John Philpott, CIPD chief economic adviser, said the combined efforts of the government, the Bank of England, employers and workers had helped limit the impact of the recession on jobs and prevented unemployment from rising as much as feared.
He added: “But it’s just as important that nothing is done to put jobs at risk during the recovery. With many employers struggling to contain labour costs this year and next against a likely backdrop of still subdued demand, the planned hike in NICs will inevitably cost jobs.
“And while the government is rightly devoting taxpayers’ money to helping Britain’s one million jobless young people, it would be absurd at the same time to raise the youth minimum wage.”
Adam Marshall, BCC director of policy said: “The cost of employing people must be reduced if future governments are serious about giving businesses the freedom to create jobs and drive economic recovery.
“Employers will create jobs and wealth, but the rise in national insurance in 2011 will mean £14bn in extra costs over the next four years. That is little more than a tax on jobs and it must be scrapped.”
Earlier this month, Personnel Today reported how proposals to freeze the NMW for younger workers could disengage a generation already badly hit by the recession.