More and more UK businesses are now looking to hire back-office positions overseas because of Rachel Reeve’s employment tax increase. The Treasury has been warned it is now missing out on millions of pounds in tax revenues because British people are not being hired.
Alex Fenton, The Legends Agency Group CEO, spoke with Express and explained how these hikes are counterproductive.
“The Government claims it is championing young and working people, yet its anti-business agenda is producing the opposite outcome, with unemployment now at its highest level since the pandemic.”
Read the full article on Express: “Rachel Reeves accused of sending UK jobs overseas with tax hikes”
Why Higher Payroll Taxes Are Reshaping Hiring Decisions
The Naitonal Insurance hike has forced businesses into paying an additional £900 in National Insurance for a worker on the average wage. According to Shadow Chancellor Sir Mel Stride this is devastating for small firms and has led to “job losses, frozen pay, cancelled investment, and now, a worrying rise in jobs being sent abroad”.
Sir Mel said: “Labour’s jobs tax is driving jobs out of Britain, shrinking the tax base, and leaving the UK worse off. We are now seeing construction firms forced to move roles overseas simply to cope with Labour’s tax hike. Labour’s National Insurance hike is costing young British workers jobs and the UK economy millions in lost tax revenue.
Daniel Herring of the Centre for Policy Studies said: “Labour's increase in employer National Insurance has made the cost of hiring workers uncompetitive. It also has a disproportionate impact on the lowest paid and the young, with the cost of hiring a minimum wage worker rising from £22,438 in 2024 to £25,852 in 2026. It's unsurprising that increasing taxes on workers reduces hiring, and these firms are only responding rationally to the incentives the government has laid before them.”
Young Workers Face the Sharpest Impact in a Cooling Job Market
Unemployment in the UK is at its highest since the pandemic, sitting at 5.1%. There is particular concern about the challenges facing young people looking for a job, with close to 85,000 18 to 24-year-olds hunting for jobs. Sir Mel is concerned that this will only worsen: “Jobs are being cut because Labour has piled higher costs and uncertainty onto employers. At the Budget unemployment forecasts went up in every single year, and the Employment Rights Bill will only make things worse.”
Offshoring Expands Beyond Traditional Sectors
Usually, call centres and administrative roles have been filled by overseas talent, but now that is changing. Alex Fenton said, “As wages and taxes continue to rise, businesses are increasingly being forced to replace British workers with equally qualified overseas staff who cost a fraction of the price. Even sectors once thought immune to offshoring, such as construction and hospitality, are now moving back-office roles overseas simply to survive mounting costs.”
Now, many people in countries like South Africa are working for UK-based businesses working as admin assistants, accounts staff, rota managers. They are also filling back-office and customer service roles for British construction and hospitality roles. Sir Mel said: “We are now seeing construction firms forced to move roles overseas simply to cope with Labour’s tax hike. Labour’s National Insurance hike is costing young British workers jobs and the UK economy millions in lost tax revenue.