National Insurance Holiday for Firms Hiring Those on Benefits Can Save £1.1 billion Per Year

Ahead of a rise in Employer National Insurance Contribution on Sunday (6 April), the Good Growth Foundation (GGF) is calling for a National Insurance Contribution (NICs) holiday for employers that hire people from long-term sickness or disability benefits. The fully-costed policy saves up to £13,549 per long-term sick person hired and £1.1 billion per year overall by reducing benefit spend and getting people back into work.

GGF research has found that nearly 7 in 10 people (67%) support businesses receiving tax incentives to hire people out of work due to health reasons. A NICs holiday will reduce costs for employers and provide an incentive to hire those in receipt of long-term sickness or disability benefits, reducing the welfare bill and offering opportunity to those who would like to work, but struggle to find employment.

Praful Nargund, Director of the Good Growth Foundation, said: 

“If we want a compassionate welfare system that helps people realise their potential, we need a comprehensive approach that includes employers. The risk of failure is too high - if we do not adequately support those who want to enter the workforce, more may fall into poverty. A NICs holiday for employers that hire those in receipt of long-term sickness or disability benefits would be a step in the right direction. This is a straightforward solution to a fraught political problem. Businesses need it, voters support it and it puts money back into the public purse.”

Voters support incentives for firms hiring those out of work due to health reasons.

• Polling conducted by the Good Growth Foundation found 67% of the public support businesses receiving tax incentives to hire people out of work due to health reasons - including 69% of Labour 2024 voters and 74% of Conservative-Labour swing voters.

The majority of voters say that the current welfare system fails to get people back into the workforce

• 53% think that the welfare state does a bad job of supporting people into work when they become unemployed.

• 46% think that it does a bad job specifically on helping those with disabilities and illnesses into suitable jobs.

Businesses are reporting hiring challenges, hindering economic expansion and hurting growth.

• Previously, the Good Growth Foundation’s business survey found workforce health is a growing concern for firms - with 35% of firms expressing concern about employee absence due to health issues and 78% of businesses saying it is important for the Government to improve public health to support recruitment.

Notes to Editor

Full costings and explanation of assumptions available on request.

Polling Data:

Conducted by the Good Growth Foundation.

Fieldwork: 2-6 March 2025

Sample size: 4,193

Weighting: All figures are weighted to be nationally and politically representative of all Britons, based on age, gender, education level, region, vote in 2024 and vote in 2019.

Focus Groups

Focus groups and interviews were conducted online by the Good Growth Foundation, 25 February 2025.

Scenario

• Assumes the baseline rate of long-term sick people moving into work is 16%

• Assumes an additional 33% of the deadweight (148,000) people move from long-term sick into work as a result of this policy

• Assumes 50% replace other workers

• Employer NI loss: £1061m/annum

• Employee NI gain: £66m/annum

• Employee income tax gain: £166m/annum

• Welfare payment savings: £1923m/annum

Total fiscal gain: £1.095bn/annum

Total fiscal gain if replacement rate is 0%: £1.828bn/annum

• In our model, each additional long-term sick person employed will create welfare savings between £13,549-16,468.

• “Additional” in this context refers to extra people going from long-term sick into work than the status quo/if our policy did not exist.

• The variable between the two figures is the replacement rate in our modelling i.e. the number of additional long-term sick individuals supported into work that then replace other workers. 

• This is because we assume the people that are replaced will take Universal Credit, offsetting some of the savings made from reducing benefits paid to long-term sick inactive people.

• For a 50% replacement rate (the rate we have cautiously assumed for all scenarios) the savings are £13,549 per additional long-term sick person that enters employment.

• For a 0% replacement rate (we have modelled this alongside each scenario as well) the savings are £16,468 per additional long-term sick person that enters employment.

About the Good Growth Foundation

The Good Growth Foundation (GGF) is a think tank that campaigns for a fairer economy, so growth can work for good. Following the UK’s lost decade of growth, we campaign and conduct research to advocate for economic growth that will reduce inequality and open access to opportunity for people of all backgrounds.

GGF was founded by Praful Nargund, who ran as the Labour parliamentary candidate in Islington North in the 2024 General Election and sat on Labour’s Council of Skills Advisors, where he shaped education policy. The chair of our Advisory Board, Tim Allan, is a former Downing Street advisor to Tony Blair and the founder of Portland Communications.

Contact

The GGF press office can be reached via email at contact@goodgrowthfoundation.com