Rising National Insurance (NI) contributions and an increased minimum wage are placing unprecedented pressure on businesses. Lord Wolfson, chief executive of Next and a Conservative life peer, warns that entry-level job opportunities could dwindle in 2025 as employers struggle to absorb these additional costs.
The Disproportionate Impact of Tax Reforms on Low-Wage Workers
The latest tax changes have lowered the employer contribution threshold from £9,100 to £5,000, significantly increasing the financial burden on businesses. For part-time, low-wage employees, tax increases equate to 6.5%, compared to just 2% for higher earners on £60,000 salaries, leaving lower-paid workers disproportionately affected.
“The axe has fallen particularly hard on those entry-level, National Living Wage jobs,” said Wolfson. “My worry is that it’s going to be harder and harder for people to enter the workforce.”
Retail Sector Faces A Double Squeeze
Businesses across the retail sector are already preparing to mitigate the challenges. Next plans to implement a 1% price increase across its range in 2025. Yet, the high street remains on shaky ground:
- Retail sales decline: December sales dropped 0.3%, driven primarily by food sales, even as clothing sales rose by 4.4%.
- Warnings of job cuts: Last year, multiple retailers—including Next—signed a letter urging the government to revise Budget measures.
Despite these pleas, Chancellor Rachel Reeves remains steadfast, describing the measures as “the right decisions in the national interest.”
Workers’ Rights Bill: A Barrier to Seasonal Flexibility?
Lord Wolfson has also criticised the government’s proposed workers’ rights legislation, arguing it could harm operational flexibility for businesses. Currently, companies like Next rely on offering employees additional hours during busy periods, such as Christmas.
Key concerns include:
- Binding contracts: “If the legislation is going to mean that those hours have to be contractually binding forever, then we just won’t be able to do it at all. It would be impossible,” Wolfson stated.
- Seasonal workforce impact: Employers could face reduced ability to adapt to fluctuating demand.
Government Spending Under Scrutiny
Beyond retail, Lord Wolfson called for greater efficiency in public sector spending, noting that the government has hired an additional 100,000 civil servants in the past five years.
“We can’t go on spending over 40% of GDP on the public sector,” he said. “If the government can commit to becoming more efficient – and deliver it – that will do more for business confidence than anything else.”
| Earner Type | Income Level | Tax Increase (%) | Potential Outcome |
|---|---|---|---|
| Entry-Level Worker | £10,000–£20,000 | 6.5% | Reduced job opportunities |
| Mid-Level Professional | £40,000 | 4% | Minimal effect |
| Senior Management | £60,000+ | 2% | Insulated from major financial impact |
Navigating the Future of Employment in the UK
Lord Wolfson’s critiques offer a stark reminder of the unintended consequences of well-intentioned policies. The balance between fostering economic growth, protecting workers’ rights, and ensuring job creation demands careful recalibration.
The government must address these critical questions:
- Can the tax system be restructured to alleviate pressure on entry-level jobs?
- Should public sector efficiency take precedence in reducing the national spending burden?
- How can businesses and policymakers collaborate to sustain both job creation and rights protection?
Got a reaction? Share your thoughts in the comments
Enjoyed this article? Subscribe to our free Newsletter for captivating articles, exclusive content, and the latest news.
