In the News Teaching Activity – what impact has the increase in employer NICs and NMW had on Pizza Hut’s profits? (Nov 2024)

Pizza Hut is trying to find ways of adjusting to the higher employer National Insurance Contributions and the higher NMW it needs to pay after the Budget.

The rise in NICs from 13.8% to 15%, combined with a 6.7% hike in the NMW, is projected to increase the labour costs of Pizza Hut’s operator by £4m, a 14% increase, next year. While businesses are urged to absorb costs, Pizza Hut faces limited ability to raise prices without alienating customers, who are still coping with higher prices after the cost-of-living crisis. To adapt, the company plans to invest in technology like self-service kiosks to reduce staffing needs. Critics argue these policies disproportionately burden low-wage employers, risking closures, job losses, and potential price hikes across many industries, not just those in hospitality. Meanwhile, the government argues closing the black hole in public finances is essential.

UK Pizza Hut to raise funds after Budget tax hikes - BBC News

1. Explain what employer National Insurance Contributions are.

2. What impact do the changes in employer NICs and the rise in the NMW have on the demand and supply for labour in hospitality?

3. Using a cost/revenue diagram, analyse the impact of the changes in employer NICs and NMW on the profits of a hospitality business such as Pizza Hut.