UK employer’s NICs function much like an income tax on wages – although supposedly not even a ‘tax’, instead having their own separate and needlessly complex regime. 

Since employer NICs don’t show up on payslips, or as part of a ‘salary package’, workers typically don’t see them as part of their tax burden. Actual employment ‘taxes’ therefore exceed employees’ perception. Talk of raising employer NICs suggests this disconnect may be exploited; how many realise that the real basic rate on employment income is already 30.9% versus 20% for most income from wealth?

Would employees instead be happier to have a lower ‘tax-free’ salary, leaving all taxes and contributions to be handled discreetly between the employer and the government? Tax rises would become someone else’s problem, at least at first. But people are smart; would most get the first rule of tax – taxing employment more would soon mean less employment or lower wage rises? Does the employer’s NIC subterfuge only go so far?  

However you dress it up, any tax rise is a government’s way of asking citizens to spend less themselves so that the government can spend more. If employment creates wealth and taxing it more will ultimately mean less employment or lower wages, is the government’s solution for today going to make the problem worse tomorrow?