​Hospitality Industry Braces for £1 Billion National Insurance Hike

The UK hospitality sector is preparing to shoulder a £1 billion cost as changes to National Insurance Contributions (NICs) come into effect this April. Approximately 774,000 workers in the industry will fall within the new NICs threshold, a shift that will impact businesses already grappling with economic challenges.

According to an analysis by UKHospitality, 20% of the hospitality workforce will be affected by the revised NICs rules introduced in last year’s Budget. Currently, over 1.2 million hospitality employees fall outside the remit of employer NICs. However, by April, that number is expected to drop significantly to just 450,000, leaving a larger proportion of the workforce subject to the tax.

The financial strain is already evident among prominent industry players. Pub group Young’s anticipates an £11 million increase in costs, while Malmaison and Hotel du Vin estimate their payroll expenses will rise by £1.5 million next year due to the changes.

The impact is particularly acute in hospitality, where a substantial portion of employees work part-time or flexible hours. UKHospitality has described the NICs hike as disproportionately damaging to the sector, warning that it could stifle recovery and growth.

Adding to the pressure, hospitality businesses face an additional £2.4 billion in costs this April, stemming from reduced business rates relief and the rise in the minimum wage. The cumulative effect of these financial burdens could lead to further closures and job losses across the sector.

In response, UKHospitality is urging the government to reconsider the changes to NICs. The organisation has proposed introducing a reduced employer NICs rate of 5% for earnings between £5,000 and £9,100, along with a lower rate for part-time workers earning below these thresholds.

CEO of UKHospitality, Kate Nicholls, criticised the changes, describing them as “one of the most regressive tax changes ever.” She highlighted the broad scope of the reform, which will affect three-quarters of a million people for the first time. “This tax is already forcing businesses to cut investment, rethink recruitment plans, reduce headcounts, and increase prices to manage these cost increases,” she said.

Nicholls also emphasised the disconnect between the sector’s potential for economic growth and the timing of these measures. “Hospitality was a significant driver of economic growth in November. Punishing this sector now, when it has such strong growth potential, is counterproductive,” she added.

As businesses adjust to these changes, UKHospitality calls for a partnership with the government to explore alternative solutions that would support businesses and their employees. Without intervention, the sector could face long-term challenges, jeopardising its recovery and contribution to the UK economy.

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