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CIPD and BCC warn of damage to recovery of adding to the cost of employing staff

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The CIPD and the British Chambers of Commerce (BCC) have called on the Government to avoid any further statutory increases in the cost of employing staff during economic recovery.

In a joint letter to Lord Mandelson, the secretary of state for business, the CIPD and BCC warn of the consequences of the 1% increase in employers' National Insurance Contributions (NICs) scheduled for April 2011, and recommend a freeze in the youth and development rates of the National Minimum Wage to avoid counteracting the impact of the Government's own welcome measures to combat rising youth unemployment.

The letter is written in the context of recent research from the CIPD that shows 12% of employers intend to recruit fewer staff as a result of the planned hike in employers' NICs, while 8% would make job cuts.

John Philpott (pictured) chief economic adviser at the CIPD, said: "The combined efforts of the Government, the Bank of England, employers and workers has helped limit the impact of the recession on jobs and prevented unemployment from rising as much as feared. But it's just as important that nothing is done to put jobs at risk during the recovery. With many employers struggling to contain labour costs this year and next against a likely backdrop of still subdued demand, the planned hike in NICs will inevitably cost jobs. And while the Government is rightly devoting taxpayers' money to helping Britain's one million jobless young people, it would be absurd at the same time to raise the youth minimum wage."

Adam Marshall, BCC's director of policy, added: "The cost of employing people must be reduced if future governments are serious about giving businesses the freedom to create jobs and drive economic recovery. Employers will create jobs and wealth, but the rise in National Insurance in 2011 will mean £14 billion in extra costs over the next four years. That is little more than a tax on jobs and it must be scrapped."