Millions of workers are finding themselves in the same boat, new research suggests. The post-pandemic wage boom has fizzled out, and many employers are shelving annual pay increases altogether.
Staff are feeling poorer, not just because of inflation, but because they aren’t getting the annual uplift they’ve come to expect.
According to Manchester-based FFT Accountants, the sharp hike in employer’s national insurance (NI) contributions has forced businesses to rethink everything.
FFT director Adam Caplan said the tax hike landed in April, just as the national minimum wage jumped by 6.7%, creating a “perfect storm” of rising costs.
It’s clear where the blame lies: in Chancellor Rachel Reeves’s autumn Budget.
The tax raid has driven up company’s wage bills, and they’re passing the cost onto customers and staff.
Businesses have “paused or stopped” their usual annual pay rises. It’s not just a pay freeze, but a pay cut in real terms with inflation at 3.4%.
This is yet another example of how Rachel Reeves’s tax rates have backfired. And millions of ordinary workers will pay the price.
Reeves needed to raise tens of billions without breaking Labour’s manifesto pledge not to increase income tax, national insurance or VAT for “working people”.
So she went after employers instead, ramping up employer’s NI to raise a tidy £25billion.
She hoped the public wouldn’t notice. But they have. Employers didn’t swallow the cost. Instead, they passed it on.
First to shoppers, through higher prices. Then to staff, by freezing salaries and slamming the brakes on hiring.
Which means « working people” are picking up the bill after all.
Since Labour took office, an estimated 275,000 jobs have vanished.
The rise in NI came into force in April, but its impact was felt long before, as firms slashed vacancies and reined in expansion plans.
According to FFT, the combined NI and wage changes have added 10% to staffing costs, a bill few businesses can absorb.
“There’s a lot of caution,” Caplan said, as pressure mounts on employers already struggling with bills and red tape.
FFT reports more employers turning to non-cash perks like extra leave, small bonuses or better working environments.
But these are cold comfort for workers trying to cope with rising rents, mortgage bills and food prices.
Take-home pay still matters. Thanks to Reeves, too often it’s being frozen.
Caplan said national statistics are starting to reflect the damage. Hiring is slowing, job security is fading and people are growing wary of jumping ship.
Businesses are playing safe, hunkering down. The economy, already fragile, is now stuck in a freeze.
Worst of all, Reeves isn’t done yet.
After her tax-and-spend spree, she still hasn’t balanced the books. That means another tax raid may be on the way in October.
That means more strain on businesses, more lost jobs – and more frozen pay cheques. Many workers could end up kissing next year’s pay rise goodbye as well.
Assuming they still have a job.
