On Wednesday 30th October 2024, Chancellor Rachel Reeves delivered the first budget since the Labour government’s election earlier this year. After weeks of speculation and rumours about potential incoming changes that would impact our employees, we are finally in a position to be able to shed some light on the matter.
We’ve summarised the key points directly impacting umbrella workers below, as well as analysing what exactly this means for our Parasol employees going forward:
From 6th April 2025
Employer’s National Insurance Contributions (ENICs): The rate will increase from 13.8% to 15%.
Employer’s NI Threshold: Reduced from £175 to £96.15 per week, impacting employer costs significantly.
National Minimum Wage: For employees aged 21 and over, the minimum wage will rise from £11.44 to £12.21 per hour.
What do these changes mean? Minimum assignment rates will need to be reassessed to remain compliant. Additionally, the lowered NI threshold will increase the annual cost per employee by £615, requiring agencies to account for these added expenses in their internal PAYE budgets.
From April 2026
Tackling Non-Compliance in the Umbrella Company Sector: New regulations will increase accountability for recruitment agencies and end clients, who may bear legal responsibility for PAYE obligations if they engage with contrived umbrella companies who exploit workers.
On this point, Parasol remains committed to working closely with the Government and HMRC as an active stakeholder, supporting meaningful reforms to ensure a transparent and compliant industry before and after 2026.
Our Director of Compliance Chris Bloor has given us his thoughts on ENICs Increase:
The expected increase of Employers National Insurance Contributions (ENIC’s) will impact all businesses, however, for those companies that work in the recruitment supply chain sector, of which I include end hirers, recruitment agencies, umbrella companies and payroll software providers we will need to ensure effective collaboration ahead of April 2025.
Parasol have already started our planning, and we will be regularly communicating with our umbrella employees and agency partners to ensure they are kept up to date and fully supported throughout the whole process.
I suspect that lots of agencies and end hirers have been keeping an eye on this and both their eyes probably began to water when they heard the announcement of 1.2% increase along with a reduction in the threshold which based on our calculations will increase employer costs by approximately £615 per year.
Tackling Non-Compliance in the Umbrella Company Sector:
As a founding member of the FCSA, Parasol have worked for years to promote compliance within the industry and on that basis welcome any measures that will help to eradicate those rogue operators. The proposed policy requires some clarification, however, the fact that these measures only become effective in 2026 provides us with ample time to consult with government and our agency partners to ensure a smooth transition.
Conclusion
While reactions to this budget day may be mixed, we wanted to take this opportunity to reassure our employees that we’re here to provide support and guide you through any changes in legislation. If you need further clarification on how exactly these latest announcements will affect your contracting life, simply get in touch with our expert team for more details.
