The increase in Employers National Insurance Contributions is a significant cost for the family business sector which collectively employs 13.8 million people across the UK. These increases, irrespective of the sector in which a family firms operates represent an increased cost of doing business that will undoubtedly have consequences for many businesses, and for some result in the need for cost savings, redundancies and possible closures, especially in the labour intensive sectors such as retail and hospitality.

Family Business United, an organisation that champions the family business community across the UK worked with Cetin Suleyman, partner at accountants Goodman Jones to look at the financial impact that the changes could have.

Prior to the changes announced in the Budget, based on an average salary of £36,000 a year before taxes (based on the November 2024 Government data for average salary in England & Wales across all sectors) the cost of Employers NICs was £3,712. With the changes announced this rises to £4,650 per person, an increase of £938 a year per employee.

Due to the very nature of the different sizes of family businesses and a significant proportion employing less than 10 people, assuming that one in ten people employed in family firms are affected by the changes, that would be 1.38 million employees which at a cost of £938 per employee would result in increased contributions from family business employers of £1.3 billion a year.

However, we know form the Oxford Economics report into 'The UK Family Business Sector 2021-22' that 149,858 family firms employ more than 10 employees which would create a cost of £1.4 billion a year, assuming they all employed 10 staff.

We can also see that there are 18,303 employing more than 50 staff and 1,516 over 250 staff so this figure is clearly an underestimate of the full cost and burden on the family business sector.

Size of Businesses	Number of Firms
Small family firms (10-49 employees)	130,039 family firms
Medium family firms (50-249 employees)	18,303 family firms
Large family firms (250+ employees)	1,516 family firms
Total family firms	149,858 family firms

Source: The UK Family Business Sector Report 2021-22 (Oxford Economics)

As Paul Andrews, Founder & CEO of Family Business United explains, "This is a large burden on the family business sector and a cost that goes direct to the bottom line in family firms across the country. For many, coming after all the economic uncertainties of the past few years, Brexit, the global pandemic, supply chain issues and rising energy costs it could be the final straw. It will certainly result in different decisions being made in family business boardrooms across the country."

"Family businesses pride themselves on taking the long term view and building businesses to pass on to future generations, safeguarding jobs for their employees too, many who will be descendants in families that have worked in the business for generations too."

"However, they also need to be financially sustainable and we are already hearing of large family business employers have to change their plans for the future in order to afford the increases they are being faced with. Family businesses already contribute significantly to the Exchequer in terms of the taxes they pay and we have to be fearful that the increase to NIC's will result in firms reducing their investments, cutting back on recruitment and looking at their staffing models."

As Cetin adds "When the increase in National Insurance is factored in with the increase in National Minimum Wage outstripping inflation by 400% many businesses will have stark choices to make."

"Projecting the financial impact is one thing, but a more fundamental pivot will be around accelerating the use of technology, and particularly AI, to replace jobs and reverse rising employment costs. For family businesses, this could go completely against their key principles of people and purpose, but failing to look at all of the options could prove very costly indeed."