Recruitment seems certain to be hit by increased staff costs from next April following last month’s Budget.
Hays Travel owner and chair Dame Irene Hays revealed staff costs would increase by 10% – amounting to £6 million – next year because of the rise in employers’ national insurance contributions (NICs) and increase in the national living wage.
Speaking at the Hays Travel Retail Conference in Turkey, she described the increased costs as the “biggest challenge” the business would face next year.
Employers’ NICs will rise by 1.2 percentage points to 15% and the threshold at which businesses pay NICs will fall from £9,100 to £5,000.
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This will come alongside a 6.7% increase in the national living wage, with a bigger percentage rise for younger workers.
More than 200 hospitality leaders signed a letter to the chancellor from trade body UKHospitality warning of “drastic” cuts in jobs and investment as a result of the measures.
Julia Lo Bue-Said, chief executive of The Advantage Travel Partnership, said: “Our view is very similar to UKHospitality’s. The chancellor talked about not hitting people in their pockets, but the increases will impact on how people think about investment, recruitment and how they reward staff.
“No one wants to create uncertainty with comments in the media, [but] this will have a material impact on businesses.”
She noted a business with 20 staff could face increased costs of £70,000 a year and said: “The rise in revenue you need to cover that is significant.”
Leading industry accountant Chris Photi of White Hart Associates said: “The NICs increase was pretty much expected. What wasn’t expected was the impact on anyone earning £5,000 a year. It has added £60,000 to £70,000 to our costs. Businesses with a lot of staff at the lower end of the pay scale face a large bill.”
Abta director of public affairs Luke Petherbridge said: “We’ve already seen a shift in the appetite for recruitment. We’re not hearing businesses say they will lay people off, but they’re saying they won’t be hiring. We’re feeding that back to the Treasury.
“The hospitality sector has additional concerns because of the NICs threshold coming down. Most staff in our sector are full-time.”
He added: “The concern for us is business rates. It’s welcome the chancellor kept some relief, but it’s a notable [cut] to 40%, reduced from 75%. A regime that has 75% relief in place for three years for smaller businesses is fundamentally broken.”
Barrhead Travel president Jacqueline Dobson said: “We need to understand how additional government funding in Scotland will be put to use. We’re pushing for parity when it comes to business rates relief.”
The Travel Network Group has launched a survey of members on the impact of the measures.
Aito is also consulting members “to understand the potential impact on businesses”.
Christina Brazier, Aito head of industry affairs, said: “Many have expressed serious concerns about the increased financial pressures. These are likely to impact both staff salaries and future recruitment.”