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Following what looks likely to be Alistair Darling’s final Budget, some commentators have suggested that a proposed 1% hike in National Insurance will have a muted impact on business, given that much of the cost is passed on to employees.

However, a quick search of Hemscott Guru and data solutions shows that companies outside the FTSE 350 employ 1.3 million workers at an average cost per employee of just over £30,000 per annum. A 1% hike in NI would therefore amount to almost £300 per employee, half of which would be shouldered by the employer – the accumulative effect of which could be devastating for small businesses with a large number of workers on their books.

These figures seem to support the argument put forward by many in small business, that an increase in NI is a direct increase in the cost of employment and a barrier to growth. Still, with the outcome of the General Election very much up for grabs, it could transpire that small business is largely saved this cost if the Conservatives win and stand by their proposal to stop the NI increase for employees earning less than £45,000.

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