Concern Over More Cash Payments To Staff After Employers National Insurance Contribution Hike

A recent study for the Department of Finance ensconced in Stormont, compiled by Ulster University’s Economic Policy Centre, has come to the conclusion that there could well be more under the counter cash payments to staff by employers in Northern Ireland, to keep their National Insurance contributions to a minimum.

If this happens it would pretty much derail the government’s intention to bring in more money to pay for various services, such as the NHS, social services and education etc. Many employers are having problems balancing the books already, due to the rise in raw goods, materials and services, along with higher energy prices, so the rise in contributions is hitting them hard.

The study was done in collaboration with some business groups so this is certainly no idle speculation. NI contributions from employers has gone up to 15% on salaries above £5,000, previously they were paying 13.8% on salaries above £9,100.

A Return To The Old Cash-In-Hand Payments

Here is what the study found, as copied from an article on the BBC News website. The article reads:

‘”There is an increased risk that businesses could return to operating on a cash-in-hand basis only,” the analysis from the university’s Economic Policy Centre (EPC) said.

‘It added that it is “important to note this point was only expressed in a small minority of consultations”.

‘The major conclusion from the EPC is that the rise in employer’s NI will have a greater impact in Northern Ireland compared to any other UK region.

‘This is because Northern Ireland is a region where pay is relatively low and the greatest proportional impact of the NI increase is on employers of lower paid staff.

‘The study found that Northern Ireland employers had been prepared for a rise in the National Living Wage (adult minimum wage) but the rise in NI had been unexpected and therefore more difficult to manage.

‘It said: “Overall employers were accepting of the NLW increase, perhaps higher than most would have liked but that is the typical response from employers most years.

“This acceptance reflects the knowledge that the government increases the NLW rate annually and also because salaries are being driven higher by labour market forces in any case.”

‘Finance Minister John O’Dowd said the study “reaffirms that decisions in Westminster are having a detrimental impact on our business community and voluntary sectors as well as impacting on our public finances”.

‘The government has previously defended the NI increase by saying it had to raise additional money to ensure the stability of public finances and address the NHS backlog.’

I think we all understand that the government do need more money in their coffers to be able to pay for the services that we all rely on, but whether the rise in employer’s NI contributions is the right way to go about this is a very moot point, particularly within the business community here.