The UK hospitality sector is bracing for significant changes as IR35 reforms and National Insurance Contribution (NICs) increases converge to create challenging recruitment conditions. For hospitality businesses and recruitment agencies alike, understanding these regulatory shifts is crucial for strategic workforce planning in 2025 and beyond.
National Insurance Contributions: The Rising Cost of Employment
Simultaneously, the increases in NICs are adding financial pressure on both employers and employees. The latest data from the Office for Budget Responsibility (OBR) shows employer NICs remaining at historically high levels, creating significant additional costs for hospitality businesses already operating on thin margins (OBR Economic and Fiscal Outlook, 2024).
Kate Nicholls, CEO of UKHospitality, recently stated:
“The combined effect of IR35 reforms and sustained high NICs is placing unprecedented pressure on hospitality recruitment, particularly in skilled positions where agency workers have traditionally provided essential flexibility”
(UKHospitality Annual Report, 2024)
Employer NICs Cost Comparison
| Annual Salary | Previous Employer NICs | Current Employer NICs | Annual Increase | Monthly Increase |
|---|---|---|---|---|
| £25,000 | £2,340 | £2,682 | £342 | £28.50 |
| £35,000 | £3,789 | £4,307 | £518 | £43.17 |
| £45,000 | £5,239 | £5,932 | £693 | £57.75 |
| £55,000 | £6,689 | £7,557 | £868 | £72.33 |
| £75,000 | £9,589 | £10,807 | £1,218 | £101.50 |
| £100,000 | £13,214 | £14,870 | £1,656 | £138.00 |
Impact on Hospitality Business Examples
| Business Type | Employee Details | Previous Annual NICs Cost | Current Annual NICs Cost | Total Annual Increase |
|---|---|---|---|---|
| Small Restaurant (10 employees) |
Average salary: £28,000 | £26,712 | £30,552 | £3,840 |
| Mid-sized Hotel (50 employees) |
Staff mix: 30 at £25,000 15 at £35,000 5 at £55,000 |
£128,235 | £146,211 | £17,976 |
| Large Catering Company (200 employees) |
Staff mix: 120 at £22,000 60 at £32,000 15 at £45,000 5 at £75,000 |
£490,830 | £560,427 | £69,597 |
Additional Financial Impact
For a recruitment agency specialising in hospitality placements the increased employer NICs must either be:
- Absorbed by the agency (reducing profit margins)
- Passed to the client (increasing costs to hospitality businesses)
- Factored into reduced contractor/temp rates (making roles less attractive)
For temporary or contracted staff supplied through agencies, the combined effect of both IR35 and NICs changes means:
- Additional administrative costs for proper determinations
- Potential liability for incorrect status determinations
- Reduced flexibility in workforce planning
- Higher overall employment costs regardless of employment model used
These figures demonstrate why many hospitality businesses are reconsidering their staffing models and seeking specialised advice on compliance and cost management in the current regulatory environment.
The IR35 Reforms: What’s Changing?
The IR35 legislation, officially known as the “off-payroll working rules,” continues to evolve with HMRC tightening compliance requirements. According to the latest guidance from HMRC, contractors previously operating through personal service companies (PSCs) are facing increased scrutiny to ensure proper employment status determination (GOV.UK, 2024).
For hospitality businesses, this means:
- Greater responsibility for determining worker status
- Increased liability risks for incorrect determinations
- More complex administration processes for agency workers
The Association of Independent Professionals and the Self-Employed (IPSE) reports that 35% of contractors have seen their projects terminated since previous IR35 changes, with many businesses opting to avoid engagement with contractors altogether (IPSE Confidence Index, 2024).
The Dual Impact on Agency Workers and Recruitment Agencies
For recruitment agencies specialising in hospitality placements, these changes present both challenges and opportunities:
Challenges:
- Increased costs of supplying temporary staff
- Greater administrative burden for status determinations
- Potential reduction in available contractor talent pool
- Compressed margins as end clients resist price increases
Opportunities:
- Growing demand for compliant workforce solutions
- Increased value of specialist IR35 knowledge and services
- Higher retention rates for PAYE employed staff
- Premium pricing for agencies that can navigate the regulatory landscape
The Recruitment and Employment Confederation (REC) reports that 78% of hospitality employers now cite regulatory complexity as a primary concern when engaging temporary workers (REC Jobs Outlook, 2024).
Strategic Responses for Hospitality Recruiters
Forward-thinking recruitment agencies are adapting to these changes by:
- Developing IR35 assessment tools and services
Offering status determination services as a value-added proposition to clients. - Creating PAYE employment solutions
Establishing robust employed models to mitigate IR35 risks. - Implementing transparent fee structures
Clearly delineating costs associated with compliance and employer contributions. - Investing in specialist compliance teams
Building expertise in the nuanced application of IR35 to hospitality roles.
What This Means for Your Hospitality Business
If you rely on temporary or contract staff to meet seasonal demands or fill specialist roles, you need to:
- Review your current workforce arrangements
- Conduct IR35 status determinations for all contractor engagements
- Budget for increased employment costs
- Consider alternative staffing models
- Partner with recruitment specialists who understand the hospitality sector’s unique challenges
How Saffron Vanilla Can Help
At Saffron Vanilla Hospitality Recruitment, we’ve invested heavily in understanding the implications of these regulatory changes. Our recruitment consultants have received specialist training to ensure all placements are fully compliant with the latest IR35 requirements. So, whether you are looking to see how our casual catering staff or our Freelance chefs can help your hospitality business, you can be assured you are legally compliant with IR35 and the rise in NICs
We offer:
- Transparent fee structures
- PAYE-employed talent pools
- Strategic workforce planning consultancy
- Regular compliance updates and training
Take Action Now
Don’t wait until these changes impact your business operations. The time to review your workforce strategy is now.
Contact our team, with training from IR35 specialists, today for a complimentary consultation on how these changes will affect your specific hospitality recruitment strategy.
Call us on 0151 227 5227 or email hello@thesvgroup.co.uk to book your consultation.
Post written & researched by QED web design | WeAreQED