The introduction of auto-enrolment of pensions in the UK will make it more expensive to hire staff, according to top 20 accountancy firm UHY Hacker Young. 

UHY Hacker Young says that the advantages UK PLC gains from its relatively low employment taxes will be put in jeopardy by the new auto-enrolment pension contributions regime. The incoming scheme will hurt small start-ups and other recently formed companies in particular, the accountancy firm says. 

The scheme will see all employers make a mandatory minimum contribution of 3% of salary to their employees’ pensions from 2018. As an example of the scheme’s impact, UHY Hacker Young says that a worker earning the UK equivalent of $30,000 (£18,740) currently costs a UK employer £1,553 per year in National Insurance contributions on top of their salary (8.3% of salary), the lowest level in the G8 countries. 

Under the new rules, from 2018, UK employers could have to pay £1,916 for the same employee, a significantly higher amount than would have to be paid in the US and Canada. 

UHY Hacker Young adds that the UK is already uncompetitive when it comes to the employment costs of senior executives, with the 8th highest employment costs for executives working in 25 countries across the firm’s international network.