Manchester-based FFT Accountants has warned that increases in Employer National Insurance (NI) are leading many employers to postpone or cancel planned pay rises.

The firm says the situation has been exacerbated by the timing of the NI hike, which landed just as a substantial rise in the National Minimum Wage came into effect.

Adam Caplan, Director at FFT Accountants, said: “We’ve seen clients stop and pause their usual annual pay increases due to the NI rises falling at the same time as a big jump in the Minimum Wage.

“The Bank of England has estimated that the Chancellor’s changes have driven wage bills up by around 10 per cent. No business can afford to ignore a change in costs of that magnitude.”

Adam added that the impact is particularly visible among SMEs, especially in the service sector, where payroll tends to be the largest outgoing.

“Most business owners hope to avoid the merry-go-round of hiring and firing their staff and the administrative burden that involves, so staffing is a thought-out and considered process that businesses want to get right.

“However, right now, there’s a lot of caution, both around hiring and wage increases, as businesses try to manage costs and maintain long-term stability.”

While employers want to support their teams, many are exploring non-cash benefits where traditional pay rises aren’t feasible.

“Some of our clients are focusing on improving the work environment for their employees, offering extra leave or small perks that make a difference day to day.

“We’re also seeing a few businesses look at pension contributions and similar benefits, though take-home pay is still an important factor, especially with things like Child Benefit thresholds in play.”

Despite interest in salary sacrifice schemes in some sectors, Adam noted that uptake remains limited among smaller businesses.

“Salary sacrifice often involves changes to employment contracts, which can be a large administrative task.

“Employees also tend to feel that the employer benefits more from these schemes than they do so they often opt out. Combined with restrictions introduced in recent years, it’s not a route many are taking.”

Looking ahead, FFT expects these pressures to have longer-term implications for recruitment and staff retention.

“We’re already seeing hiring slow down and national statistics seem to mirror this, with numbers showing people out of work increasing.

“While skilled people will always be in demand, with the country teetering on the edge of an economic downturn, people are likely to find it harder to find secure jobs, hence why many are opting to stay in their current roles where they feel they have more security.”

Adam also raised concerns about the disconnect between Government policy and the day-to-day experience of small business owners.

“A lot of clients feel that ministers, particularly senior members of the current Government, don’t understand how businesses actually operate.

“They aren’t taking feedback from industry groups or SME leaders seriously enough, especially considering that decisions from Westminster have a massive impact on business owners across the country.

“We’re hearing from a growing number of clients who are reconsidering their long-term plans, including whether to remain in the UK or adapt their business models, because they no longer feel adequately supported.

“That said, most business owners aren’t looking to walk away, they simply want to see practical support and clearer direction. There’s still a window for policymakers to re-engage meaningfully and restore confidence among SMEs.”

FFT Accountants works closely with businesses across Greater Manchester and beyond, helping them manage change, reduce risk and plan ahead with confidence.

For more information or to speak to an adviser, visit www.fft.co.uk or call 0161 834 2574.