The UK’s construction industry is staring down the barrel of a fresh financial burden as Employer’s National Insurance Contributions (NICs) rise from 13.8% to 15% this April. Simultaneously, the threshold at which businesses start paying has been slashed from £9,100 to £5,000.

The government’s line? It’s a responsible move to fix public finances. But construction SMEs see it differently, many are calling it a stealth tax on employment that could stall hiring, delay key projects, and cause lasting damage to an already stretched industry.

Small Builders, Big Burden

While large firms may absorb the costs, SMEs who make up 99% of the UK’s construction sector will bear the brunt. These companies are already battling rising material costs, skills shortages, and supply chain chaos. Now, they face an increased tax on every single job they create.

“This isn’t just another hike it’s a hammer blow to businesses doing their best to grow and keep people in work,” said Catherine Storer, Executive Director at Essential Site Skills. “We’re not asking for handouts. We’re asking the government to stop punishing us for employing people.”

Employment Allowance: A PR Move That Doesn’t Work on Site

To soften the backlash, the government raised the Employment Allowance from £5,000 to £10,500 in April 2025, and removed previous eligibility caps. In theory, this should help small businesses absorb the NIC increase.

In reality? It’s not even close.

The allowance only applies once per business, not per employee, and for labour-heavy industries like construction, it doesn’t come close to covering the increase in Employer NICs.

“Unless you’re running a business with a handful of part-timers, this allowance is little more than a soundbite,” said Storer. “It hasn’t mitigated the cost for any of the construction SMEs we work with. It’s nowhere near enough.”

Jobs Tax Could Stall Apprenticeships and Kill Off Hiring

The industry is especially concerned about the knock-on effects of this increase. Firms may delay or cancel apprenticeship schemes, avoid taking on trainees, or even cut back their teams to manage costs. In an industry already struggling with workforce shortages, that’s a disaster in the making.

“We need new blood in construction, not barriers to entry,” Storer continued. “This policy pushes employers to think twice before offering someone a job. That’s the wrong direction entirely.”

Bitten by the Hand That Builds You

With housing targets and infrastructure goals already in jeopardy, many in the industry are questioning the long-term consequences of taxing employment so heavily.

“Growth doesn’t come from taxing jobs,” said Storer. “This feels like a war on employers disguised as fiscal policy. And let’s not forget, every job in construction supports several more in the wider economy.”

Construction Sector Urges U-Turn

There’s still time to course correct. Industry leaders are calling on the government to:

• Re-evaluate the impact of Employer NIC increases on SMEs.
• Expand Employment Allowance or introduce targeted relief for labour-intensive sectors.
• Engage directly with construction industry representatives to build smarter tax policy.

“Construction isn’t just another sector, it’s the foundation of our economy,” said Storer. “If you want to rebuild Britain, you don’t start by taxing the hands holding the bricks.”