WORKPLACE pension reforms will slash the UK’s competitiveness and pile on the cost of employing workers for cash-strapped companies, figures out today show.
Auto-enrolment is set to make pension saving for UK workers mandatory but laws forcing employers to stump up cash as well is set to threaten the UK’s low employment cost advantage, chartered accountancy network UHY Hacker Young Group found.
The UK currently has the eighth lowest employment costs in the world for employees earning $75,000 (£46,849) but under new auto-enrolment pension rules – currently being rolled out across the country – the UK will fall to thirteenth behind countries like the US, Canada, Ireland, Denmark and Israel by 2018.
The burden will also hurt much needed start-up companies by adding an extra £360 for every worker each year from 2018, the figures show.
Companies currently pay £5,432 in national insurance contributions per employee per year but the looming pension changes mean it will shoot up to £6,477 per employee within five years.
Last year, the government shelved a proposal to scrap auto-enrolment from entrepreneur Adrian Beecroft, who said it would be too expensive.
Leading academic Michael Johnson said despite increased up-front costs for employers, money paid into a pension pot could pay dividends in the long run.
“If the savings accumulated are invested back into the capital markets and infrastructure then auto-enrolment is a good idea,” he said.