Employee benefits | Will NI rises spark benefits budget cuts?

It’s been much-trailed, and – as a result – much feared by employers: the rise in NI contributions - to 15% on staff salaries over £5,000.

For really big employers, it’s a really big deal. Tesco says it faces paying an extra £250 million per year in higher employment costs. But even small-to-medium sized employers will be feel the squeeze. For any employer paying the mean UK salary of £36,000 pa, the real increase in employer costs will hit and extra £937.50 per year.

This is already having a trickling-down effect on planned pay rises – with data from Towers Watson suggesting that around one third (33%) of all UK employers will now offer lower-than-planned salary rises in light of the NI increases – with average pay increases falling from 4% to 3%.

But what about the impact the NI rise is/likely to have on spend on employee benefits – a cost that employers typically pay another 20-30% of salary costs on, and which is still sometimes seen as discretionary? Will this be one of the first things employers will seek to cut back on?