Hospitality faces £2,500 rise in staff costs following Budget changes

By James Bayley

Published: 01 November, 2024

The Autumn Budget’s employment tax measures will raise the cost of employing full-time staff by at least £2,500, according to an analysis released by UKHospitality.

The increase, which is based on a full-time worker aged 21 or over earning the National Living Wage (NLW) and working 38 hours weekly, includes a rise in employer National Insurance Contributions (NICs) from £1,863 to £2,869, marking a 53.9% hike.

UKHospitality’s data also highlights the impact across varied employment scenarios in the industry. For instance, the employment cost of a single parent working part-time hours – 9 am to 3 pm, five days a week – will increase by £2,100, while a student working 14 hours on weekends will add £1,140 in costs.

Read more: Chancellor announces pay rise, adding £1.9bn to hospitality wage bill

Chief executive of UKHospitality, Kate Nicholls, expressed industry concerns over the added expenses. “The increase to employer NICs and, crucially, the lowering of the threshold left hospitality owners with a sleepless night as they came to terms with the enormous cost they will have to bear from April onwards,” she said.

“The new cost of employing core members of staff is eye watering – an increase of at least £2,500 is far, far beyond what anyone’s worst-case scenario was.”

Nicholls warns that the rising costs may lead to staffing reductions. “Hospitality venues will now have to ditch their ambitions to employ more people and do the very opposite – cut hours, scale back recruitment, and, in extreme circumstances, let people go, because they simply can’t afford the scale of these costs,” she added.

The Institute for Fiscal Studies has noted that employers of NLW workers will be hardest hit, with hospitality, a sector employing around 3.5 million people, bearing a significant brunt. The budget’s impact is predicted to be felt throughout the industry and is expected to influence business decisions over staffing, pricing and investment.

Andrew Bewes, MD of Hallgarten & Novum Wines, also acknowledged the severity of the situation, stressing the ripple effects across hospitality and retail. “The enormity of this week’s Budget statement will not be lost on anybody in the trade,” he said. Bewes highlighted concerns about the pressures that wage and tax increases will place on the sector, describing a “perfect storm” of inflationary pressures likely to affect both businesses and consumers.

As industry leaders voice their concerns, the sector braces for the combined effects of increased employment costs, higher prices and tightened margins in a challenging economic climate.

Printer friendly version