The Institute of Directors has urged the government to “come good” on its promise of tax cuts for employers after a new impact assessment showed that the National Living Wage, which comes into force next April, could cost private sector employers more than £1 billion.
Seamus Nevin, Head of Employment and Skills Policy at the IoD said: “IoD members supported the introduction of the Chancellor’s living wage as part of a deal he made with business – lower taxes for higher wages.
“Worryingly, however, the Chancellor’s £1 billion living wage is not the only extra cost businesses have been hit with. A new payroll tax, in the form of the apprenticeship levy, will cost employers £12 billion over the course of the parliament, while the next tranche of pensions auto-enrolment will affect the very smallest businesses. This is not to mention a number of significant additional reporting requirements firms will have to comply with. The cumulative effect of these will be considerable, particularly for those medium-sized businesses that just meet the threshold for compliance.
“It is imperative that the government now comes good on its promise of less red tape, fewer regulatory hurdles and a lower rate of corporation tax to help employers absorb these additional costs and raise pay.”