Across the UK, business leaders have forecast that businesses are facing an additional tax bill of around £25bn to fund employer NIC.

The service sector, in particular tourism, hospitality, care, entertainment, retail and professional services are particularly vulnerable to the increases in employment costs given the younger workforce, recruitment problems and reliance on consumer spending, which is showing signs of contracting. According to industry figures, hospitality is the third largest employer in the UK, with 3.5 million employees.

A recent survey by the CBI warned that up to two thirds of businesses will halt hiring plans whilst almost half will make redundancies and suspend salary increases. The National Living Wage for people aged 21 and over and the National Minimum Wage for people of at least school leaving age are also increasing, adding to the rising costs crisis now facing many businesses.

The increase was accompanied by a reduction in the secondary threshold at which employer NICs become payable from £9,100 to £5,000 per year – this reduction in the secondary threshold alone will cost employers an additional £615 per employee.

Business owners and entrepreneurs concerned about the cost of business crisis are being urged to undertake a full review of overheads and seek professional advice as soon as possible.

Mark Pryce, head of corporate tax with Azets in Scotland, said: “For many Scottish businesses this is a massive increase in the cost of employing staff.

“Many businesses are extremely concerned about the proposals and concerned that investment will grind to a halt, be it spending on plant and equipment or investment in their employees.”

Nicola Campbell, head of Azets business services in Scotland, added: “There are already signs that the economy is contracting with growth static and unemployment on the rise.

“Businesses have just four months until the tax changes, so should use the time to work out how best to mitigate these additional taxes.

“Many businesses are worried about how to work out their new breakeven points and what needs to be done to recoup the higher outlays from April without increasing prices or being forced to cut staff hours or worse, make redundancies. Employees are the lifeblood of any organisation big or small and they are going to be affected.”

Azets has outlined a few ways in which businesses could try and contain or neutralise soaring business taxes and the cost of business crisis:

• Enhanced management information: A better understanding of the cash flow impact through forecasting and projections helps informs businesses to negotiate with customers or suppliers to improve margins or contain capital expenditure.
• Reduced hiring: Companies with significant wage bills may suspend hiring for new roles. An employer with 50 employees, receiving an average salary of £50,000, will incur additional NICs costs of over £55,000.
• Redundancies: The worst-case scenario but many businesses are already reducing their staffing levels.
• Flexible and shorter hours: An increasingly popular option for service businesses choosing to operate for four or five days a week and cut their overheads.
• Recruitment freezes: Instead of filling vacant roles, businesses may require existing employees to take on additional responsibilities, increasing workloads.
• Paused or reduced benefits enhancements: Plans to improve employee benefits, such as healthcare, pension contributions or moves to a living wage, could be halted.
• Restrained salary increases: Employers who had budgeted for a 4% rise in labour costs may feel compelled reduce planned salary increases.
• Salary sacrifice: Sometimes referred to as pension salary exchange (PSE), salary sacrifice can produce significant NIC savings for both employer and employee.