NI Rise
Crawford Temple is CEO and founder of Professional Passport discusses how the rise in National Insurance for workers affects recruiters
In April 2022 both the Employers and Employees National Insurance rates increase by 1.25 per cent, as announced in the last budget.
Whilst there are many calls for this to be scrapped for this year on the back of the increased inflation, increased cost of living and fast rising fuel prices there are, as yet, no signs of this happening. Following the introduction of the off-payroll working rules, many workers are now operating through umbrella companies and this increase is set to have an impact on their earnings.
The rate paid to the umbrella company is the umbrella company’s income. From this, the umbrella deducts their employment costs which includes Employers National Insurance. With this rising from 13.8 per cent to 15.05 per cent from April this will have an impact on the amount that is available for payment to the worker. On top of this, the worker will also have an additional 1.25 per cent charge on their Employee National Insurance.
As this is not a new deduction and therefore not seen as a material change under the rules relating to Key Information Documents [KID] no updated document will be required.
It is possible that the reason this has been planned for the 2022/23 tax year is to allow the payroll software providers enough time to develop and test their systems for the new category that will be introduced in the tax year 2023/24, which starts in April 2023.
In 2023/24 the rates revert to current levels and a new charge is introduced adding a new category for National Insurance in 2023. This new category will include the 1.25 per cent charge. Whilst the net pay position of the worker doesn’t change at that time this is likely to be seen as a material change under the KID regulations and will require all workers to have a new KID issued. It would be advisable for recruiters to make a note in their diaries to contact their umbrella providers early next year to discuss how best they can support you with the changes.
But today, with workers facing a real drop in their take-home pay because of the change and increased cost of living, many will be seeking rate reviews as they become aware of these changes.
Discussing this with end clients and agreeing on how this will be handled for contracts that go beyond April will allow you to answer contractors’ concerns.