Companies face even higher than expected NIC increases from April after little-noticed amendments to the Child Support, Pensions and Social Security Bill says KPMG. Gifts given to company staff by external suppliers will have Class 1A NIC applied to them, with employers also being responsible for policing the arrangements. This is in addition to companies having to pay 12.2% NIC on a much wider range of benefits they provide to staff.

Inez Anderson, Remuneration Consulting Partner at KPMG, said: "The third party arrangements will be an unwelcome administrative burden to a great many companies. If, say, Sony promised sales people at Dixons that they would get Marks & Spencer vouchers for every Sony TV they sold, Dixons will now be responsible for checking each individual arrangement and settling the NIC, with penalties if they get it wrong. At a time when many companies are complaining of red tape, this is not at all welcome."

Inez Anderson added: "The increase in employer NIC is already a problem. It is going to have a significant effect on staff costs and we are worried that companies will start reviewing the benefits they offer to existing and potential employees. That would have a detrimental effect on recruitment and remuneration policy."

As an example, for an employee who has season ticket and other interest-free loans totalling £6,000, free local gym membership costing £575 a year and BUPA family membership at £600 pa, the additional cost to the employer will be almost £190 a year. Multiply that by 50 employees and the company would have to pay an extra £10,000 a year. For large companies with several thousand employees the figure might be £500,000 or more, depending on the benefits offered.

Inez Anderson said: "We are particularly worried that employers operating flexible benefits schemes will be hit, and others considering running them might be put off because of these changes to the NIC rules. They are excellent schemes, which treat staff as adults and allow them to choose the benefits which are right for them. It would be shortsighted if employers were to back away from them now just because NIC savings are lost, as they have been a significant success in terms of recruitment, retention and motivation of staff."