On Wednesday, 30th October 2024, Chancellor Rachel Reeves delivered the first Labour Budget in over 14 years. As rumoured, Employer’s National Insurance (NI) will rise from 13.8% to 15%. Now the Budget 2024 has been and gone, how will the rise in Employer’s NI impact recruitment agencies and candidates placed in temporary assignments via a PAYE umbrella company?

In the Budget 2024, it was announced that Employer’s NI will be increasing from 13.8% to 15%, coming into effect April 2025. The annual threshold is currently £9,100 and this will be lowered to £5,000 – a decision that the Chancellor described as a “difficult choice”.

Before the official announcement, Chris Bryce, CEO at the Freelancer and Contractor Services Association (FCSA) told IT Contracting:

“A possible increase in Employers’ NICs is being painted [by the government] as not being a tax increase for ‘working people’.

“In [practice], it absolutely would be a tax increase for working people.”

These comments apply to temporary workers operating through a PAYE umbrella company. The deductions on umbrella employee payslips (taken from the assignment rate) include the employment costs, which compromise of the Apprenticeship Levy (0.5%) and the Employer’s NI.

Recruitment agencies should already be well aware of the employment costs and the minimum assignment rates they should be presenting to candidates requiring an umbrella company for payroll. With this in mind, forward-thinking agencies will already be planning ahead and assessing the implications of the rise in Employer’s NI on future assignment rates. In reality, a small uplift is likely necessary to ensure candidates continue feeling valued and fairly paid post-April 2025.

Sarah O’Toole, Operations Director at Churchill Knight Umbrella, discussed the rise in Employer’s NI and provided some advice for concerned umbrella employees.

“There is no hiding from the fact that an increase in an Employer’s National Insurance will impact end-hirers who engage with contract workers, and there is a risk the implications will be passed down the supply chain, leaving skilled workers out of pocket. However, I am confident that hirers and staffing agencies will value their candidates highly enough to offer higher assignment rates to counteract the 1.2% increase in Employer’s NI.

From an umbrella company’s perspective, our responsibility is to ensure we make all the correct and legal deductions to our employees’ assignment rates before transferring the net salary to their personal bank accounts. Therefore, any concerns over rates of pay and the implications of the increase in Employer’s National Insurance should be raised by workers with their staffing agency or directly with the hirer if no agency is involved.”

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Churchill Knight Umbrella takes compliance extremely seriously and we’re delighted to be one of the few umbrella companies in the UK with FCSA accreditation and SafeRec certification. We have fantastic online reviews (4.4/5.0 on Google and 4.8/5.0 on Trustpilot) and always go the extra mile to ensure our partners receive the very best service, and candidates are paid efficiently and compliantly.

To learn more about our PAYE umbrella service and the benefit of partnering with us, please call 0808 2525533 or send us a message here. We’re continuing to appear on more Preferred Supplier Lists and it’s been fantastic to build new relationships with agencies that value compliance as highly as we do.

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