Why Labour is killing the part-time job

National Insurance raid on businesses raises the cost of employing part-timers by as much as 73pc

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Stephen Burns took time out of his holiday in Greece to watch the Chancellor’s maiden Budget live.
The boss of the FTSE 250 company Hollywood Bowl had been optimistic that Labour’s pro-business message meant companies like his would not be hung out to dry.
In the end he describes Labour’s first fiscal event in 14 years as an hour of broken promises.
“We were very disappointed, and that’s putting it mildly,” says Burns, who employs 2,600 mostly part-time workers at more than 60 sites across the UK.
Reeves’s decision to launch a £25bn raid on employers by increasing the rate of National Insurance they pay will see the levy rise by 1.2 percentage points to 15pc from next April.
For many businesses, the biggest shock wasn’t the rate increase but a near halving of the threshold at which they have to start paying National Insurance contributions (NICs) for their staff. This threshold was lower from £9,100 to £5,000.
The hospitality industry has warned that the changes will cost the industry £1bn overall and means companies will for the first time have to pay tax on the wages of thousands of part-time hospitality workers.
Taken together, the changes mean that a company employing a part-time worker doing 15 hours a week will see their NICs bill increase by 73pc, UK Hospitality estimates.
“We genuinely believed what we were told, which is that we weren’t going to see National Insurance contributions increase and that Labour were pro-business,” says Burns. “So it was very disappointing to see that we were hit really hard with a significant increase.”
Burns, who has not yet updated investors about the impact of the tax raid, describes it as significant. “It’s going to sweep off quite a lot of profit.”
These extra costs come on top of big increases in the minimum wage, including the biggest pay rise on record for young workers aged between 18 and 20 who will see a 16pc mandated increase in their wages to £10 an hour from April.
“We’d factored in that increase in the minimum wage. It was well understood,” Burns says. “What we hadn’t factored in was that big increase in business taxes. So we were very disappointed.”
Official statistics show there are 8.4m people working part time in the UK, representing roughly a quarter of the workforce.
Most are happy with this arrangement, with only one in 10 wanting to work more hours than they currently do.
The reduction in the NICs threshold means a company that employs a part-time worker over the age of 21 working just eight hours a week – typically, one shift – on the minimum wage will be hit with a tax bill for the first time.
Britain’s tax and spending watchdog estimates that reducing the threshold will net the Exchequer £17.7bn of the hoped-for £25bn a year, before taking into account the fact that some people will work less or earn less as a result of the policy, and that the smallest businesses will be given a tax break.
The Office for Budget Responsibility (OBR) says 250,000 employers will actually gain from this package, while 820,000 will see no change. However, the biggest share – 940,000 – will lose out.
For Burns, it makes employing part-time workers much more expensive.
“The threshold changes – particularly for the hospitality businesses – disproportionately affects us, because of the peaky nature of our business.
“We have lots of people who come and work for us for relatively short periods of time. They go back to university and when they break up, they come back. They’ll do hours that suit them. But with the threshold being lowered, it just pulls many, many more people into paying tax.”
Kate Nicholls, the chief executive of UK Hospitality, describes the increase in costs as “eye-watering” and warns that it disproportionately hits companies in her sector, given many employ part-time staff in roles such as waiting and bartending.
She adds: “This is just not sustainable and will ultimately do real harm to our ability to support employment. The lowering of the NIC threshold increases those employment costs by as much as 75pc for those on part-time contracts. These are often people who need flexible hours, like carers and working mums and dads.”
Jonathan Greatorex is one of those employers. His workforce at the Hand At Llanarmon, a country hotel in Llangollen, North Wales, is as diverse as they come. “We’ve got about 25 staff on paper,” he says. “I would say probably 60pc of those are part-time across all age ranges, from 16-year-olds to 70-year-olds.”
Greatorex, who has run the hotel for a decade, says he does not know how he will cope with the extra costs. “The impact for a business like ours is really quite terrifying,” he says. “I’m looking at an extra £30,000 a year at a minimum. Having come through Covid and the cost of living, this is a real body blow for us and for the whole sector.”
Neil Carberry, the chief executive of the Recruitment and Employment Confederation, warns that reducing the NICs threshold will make solving Britain’s worklessness crisis harder.
“The threshold change is especially challenging as it raises NI on the wages of lower salaried workers much more – not just lower paid workers but also many part-time workers who will become far more expensive to engage,” he says.
Carberry adds that one of his members who employs hospitality workers has 31 of their own staff but also payrolls all their temps. “Their NI bill goes from £375k per annum to £657k, wiping out their profit. These kinds of rises make creating entry-level roles less attractive and that will damage the fight against economic inactivity.”
On a hostile call last week with retail chiefs and hospitality leaders, Jonathan Reynolds, the Business Secretary, and James Murray, the Exchequer secretary to the Treasury, were quick to point out that employer NICs are not payable on the earnings of employees aged under 21.
But Burns says it will still leave his company facing tough choices.
“Whenever you get a significant cost increase, you’ve got three options. You cut costs, you put prices up or you stall investment. I don’t think it’s right that we’ll be stalling investment. So our biggest cost savings come under property or people.
“Property savings you can’t make very quickly, but you can with people. So clearly, we’ll be looking very hard on our payroll lines. Every new team member we recruit now will involve significant incremental cost.”
Working in places like Hollywood Bowl is often a first job for many, one that gives them valuable experience in how to behave in an organisation that they can then use as a launching pad for other things.
But Burns warns that increasing employment costs will make getting that first job harder.
“For a lot of people, we’re a gateway employer. Many people’s first job was in hospitality. We teach people how to work and how to behave and how to act in the workplace before they know better. And, yes, we get disproportionately impacted by sickness and people not turning up, and people who don’t know what to do – but when employment costs are lower we can afford to double up on shifts and train them up.”
Greatorex, at the Hand At Llanarmon in Llangollen, agrees: “The reality is, we will be going from the stage where we were always keen to look out for young people who want to come work for us to saying, ‘Actually, at the moment we’re not recruiting, we’re cutting back.’”
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