The Chancellor’s decision to increase employers’ National Insurance Contributions (NICs) from 6 April 2011 may have a significant effect on the growth on the recruitment sector and company’s hiring decisions, warns Bibby Financial Services.
In his final Pre-Budget Report before the General Election, Alistair Darling revealed plans for employers, employees and the self-employed to pay an extra 0.5 per cent on rates of NICs, which will come in addition to the 0.5 per cent increase already set in place for 2010.
However, while employees will start paying higher levels of National Insurance, employers will also have to pay extra NICs with the rate rising from 12.8 per cent to 13.8 per cent in April 2011. This could potentially have a detrimental effect on both the recovery and growth of the sector.
Edward Winterton, Bibby Financial Services recruitment finance specialist, commented: “The Chancellor’s announcement to increase National Insurance Contributions has come as a nasty surprise to the recruitment industry, which continues to suffer the effects of the recession.
“Looking forward, the increase is most likely to impact on job creation, as the cost of employing somebody will increase by one per cent, making firms more reluctant to take on recruits. It is important for the sector to acknowledge that this could have a dampening affect on its overall recovery and cause a potential dip in business.
“Despite the Chancellor’s announcement to extend both the Business Payment Support Scheme to give small firms more time to pay tax bills and the Enterprise Finance Guarantee (EFG) scheme, which allows small firms to access another £500 million of credit in 2010, we would urge all recruiters to plan now to avoid problems later.
“The issue of cash flow and survival are intrinsically linked - we all know that good credit management is essential for any business, particularly in unstable times such as these. Therefore, it is vital for firms to ensure they have sufficient cash flow plans to cope with the potential drop in their business. Outsourcing back office functions, such as payroll and chasing late payments, as well as ensuring a regular and smooth flow of cash into the business, can make all the difference between boom and bust.”
Specialist business financier Bibby Financial Services provides a unique recruitment finance package which is tailored to meet the demands of the recruitment industry offering a combined invoicing, funding, collections and payroll service which can save time and money.
Winterton concluded: “There is no doubt that there are tough times ahead, but with adequate funding in place, firms can reduce the burden of cash flow problems and make the path to recovery more accessible at a time when they need it most.”
