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Umbrella workers’ NIC increase is almost double regular workers

As we all know the Chancellor has imposed an increase in both employers’ and employees’ National Insurance Contributions (NICs) to take effect from April 6th 2022. The increase being imposed is 1.25 percentage points meaning the actual rise is about 9% for employers and 10% for employees.

For some time, most freelancers working for end clients through an umbrella company have been driven by the off-payroll working rules so that their take-home pay reflects both employees NICs (eeNICs) and employers NICs (erNICs) contributions. Whilst at first glance this may seem strange and unfair, it is nevertheless true and is explained by HMRC here.

You’ll see that the increase in NICs, which is to become the Health and Social Care Levy next year, will result in many umbrella workers losing almost 2.5% of their current take-home pay rather than the 1.25% of regular employees. This is at the time of spiralling inflation and massive rises in gas and electricity bills. This is a time for recruitment agents and their end-clients to step up to the plate and increase assignments fees to cover the cost to the worker.

FCSA represents many of the UK’s umbrella companies and FCSA Members have a total of c118,000 freelancers on their books, all of whom will be affected by the rise in NICs.

As an example, taking an umbrella company employee earning £50,000 per year

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From April 2022, the umbrella worker, like all other employees, will pay an extra £505.40 in employees’ NICs, but their take-home pay will also suffer further because of the extra £514.50 of employers NICs.

This is clearly unfair, and we are asking FCSA members to work with their supply chain, the employment agencies and end-users, to ensure that the end-users increase assignment rates to account for this rise so that the extra burden caused by the NICs increase does not fall on the worker.

FCSA are also urging the Chancellor to cancel these increases in NICs altogether or, failing that, to introduce an amendment requiring the end-users to increase the assignment rates paid to their freelancers to account for the rise in employer NICs.