The concern over the number of jobs available for IT contractors after employer National Insurance contributions are increased is a "red herring", according an independent expert.

Economists agree that the impact on jobs caused by the NI rise is likely to be small; it will instead be employee pay rises that will take the biggest hit, according to the Institute for Employment Studies (IES).

As many firms have held on to staff during the recession they are able to handle the NI rise, but costs will be kept to a minimum by limiting wages as much as possible, claims IES director Nigel Meager.

"The ultimate effect will depend entirely on how the extra revenue raised through the NI increase is spent … it could even lead to more jobs through the effect on consumption and demand," he said.

Recent data from the Office of National Statistics confirmed that the number of unemployed people in the UK has reached 2.5 million, the highest figure since December 1994.