Recruiters could be hit hard by the Chancellor’s decision to raise employers’ National Insurance Contributions (NICs) from 6 April 2011, according to Bibby Financial Services.

In his final pre-Budget report before the General Election, Alistair Darling said employers, employees and the self-employed would pay an extra 0.5% on rates of NICs, in addition to the planned 0.5% for 2010.

Edward Winterton, Bibby Financial Services recruitment finance specialist, says this increase will come as a nasty surprise to the recruitment industry, which continues to suffer the effects of the recession. 

Winterton says: “Looking forward, the increase is most likely to have an impact on job creation, as the cost of employing somebody will increase by 1%, making firms more reluctant to take on recruits.  It is important for the sector to acknowledge that this could have a dampening effect on its overall recovery and cause a potential dip in business. 

“Despite the Chancellor’s announcement to extend both the Business Payment Support Scheme to give small firms more time to pay tax bills and the Enterprise Finance Guarantee (EFG) scheme, which allows small firms to access another £500m of credit in 2010, we would urge all recruiters to plan now to avoid problems later.”