Plans to raise the level of National Insurance paid by employers has been dubbed a "tax on jobs".

It is feared the move reportedly being considered by Chancellor Rachel Reeves would lead to firms hiring fewer people, derail investment and impact pensions.

Analysts and experts have raised concerns ahead of the much-anticipated first Budget of the new Labour UK Government that is expected on October 30.

What is National Insurance?

National Insurance contributions are the UK’s second-biggest revenue stream behind income tax, and the Institute for Fiscal Studies said it is expected to raise just under £170 billion in 2024/25, which is about a sixth of all tax revenue.

Who pays?

National Insurance is paid by employees and the self-employed on earnings, and by employers on the earnings of those they employ. Employers currently pay National Insurance of 13.8% on all earnings above £175 per week.

What are the concerns?

An increase in National Insurance contributions for employers could harm Labour's aims to increase the number of people in work and improve workers’ finances, said Blick Rothenberg, the audit, tax and business advisory firm.

Partner Neil Insull said: "We know Ms Reeves won’t increase corporation tax, as she is keen to headline a cap on the corporation tax rate of 25% for the course of this Parliament. This leaves her with only one realistic ‘difficult decision’ to make for businesses, an increase in employers' NI contributions.

"However, increasing NI contributions could be counterproductive for Labour’s proposals to improve workers’ finances and increase the number of people in work. Some businesses may have no choice but to avoid taking on new hires, cut pay rises and scale back pensions to reduce their tax burden. Alternatively, businesses could pass those costs on to consumers with higher prices."

Could this affect investment?

The National Centre for Universities and Business said that a National Insurance surcharge on employers hiring graduates, which was included in a Higher Education Policy Institute report, could hinder both economic growth and business investment in the UK.

Rosalind Gill, of NCUB, said: "Raising a National Insurance surcharge for employers could have a range of unintended consequences. Employers already make significant contributions to higher learning, including working with universities on course design, placements, apprenticeships, and employability, as well as making investments in the lifelong learning of people beyond the three years of a degree.

"Further complicating the taxation system with an additional surcharge would not help employers to genuinely invest in the skills they need, and will not help address the challenges being faced in the university sector."

What's this about pensions?

Employers currently do not pay National Insurance on pension contributions, but this could change. Helen Morrissey, head of retirement analysis, Hargreaves Lansdown, said: "There are a few scenarios at play. One is that the headline rate of 13.8% on earnings above £175 per week gets increased – a move that will push up wage bills. The other is that National Insurance gets levied on employer pension contributions - a cost of up to 13.8% and a damaging one.

"Even if the government didn’t opt to impose the whole 13.8% on contributions it would still hurt. If, for example, it added employer NICs of 2% on contributions, it would add £17.25 per year to the cost of paying into the pension of someone earning £35,000 per year and receiving the auto-enrolment minimum of 3% from their employer. Spread that across a couple of hundred employees then the figures get big fast.

"The concern is that employers may look to mitigate these costs with smaller wage increases, which will impact people’s ability to meet their day-to-day living costs."