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A recent study conducted for Stormont’s Department of Finance suggests that the increase in employer’s National Insurance (NI) may lead to businesses resorting to off-the-books cash payments to staff. This rise, which took effect in April, requires employers to pay NI at 15% on salaries above £5,000, up from the previous rate of 13.8% on salaries exceeding £9,100. As a result, businesses are now facing higher costs when it comes to employing individuals.
According to the study by Ulster University academics, there is a concern that this increase in NI could potentially encourage the growth of the “informal economy”. The analysis from the university’s Economic Policy Centre (EPC) highlights the risk of businesses reverting to operating solely on a cash-in-hand basis. While this viewpoint was only expressed by a small minority of those consulted, it underscores the potential consequences of the NI rise.
The impact of the rise in employer’s NI is expected to be more significant in Northern Ireland compared to other regions in the UK. This is due to the relatively lower pay in Northern Ireland, making the increase in NI have a greater proportional impact on employers of lower-paid staff. Additionally, the study found that while Northern Ireland employers were prepared for an increase in the National Living Wage, the unexpected rise in NI posed greater challenges in terms of managing costs.
Finance Minister John O’Dowd expressed concerns over the detrimental impact that decisions made in Westminster are having on Northern Ireland’s business community, voluntary sectors, and public finances. Despite the government’s defense of the NI increase as necessary to address the NHS backlog and ensure financial stability, the study’s findings shed light on the potential risks and challenges faced by businesses in Northern Ireland as a result of the NI rise
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