National Insurance changes

80% of employers are unaware of impact of National Insurance changes

Changes could mean big savings for UK businesses that use temporary agency labour

Research from the number one procurer of temporary agency labour, de Poel, has found that 80% of employers are unaware of the impact of the National Insurance contribution changes on their businesses.
 
This statistic comes despite the changes having already come into force on Wednesday 6th April, when the rate  increased from 12.8% per week to 13.8%.

More information

While many business owners are concerned about increased expenditure when the economy is delicate, employers are unaware that the increase in National Insurance contributions may actually save them money on their temporary agency labour.

de Poel’s calculations show that for a vast majority of companies using temporary agency workers, the changes will actually equate to a saving, not a cost. This is due to the change in ‘freepay’ – the amount an employee can earn before Employers National Insurance (ENI) is deducted.

Currently freepay is set at £110, however from April that will increase to £136 and this will have a sequential effect on the contribution increases. For temporary agency workers on lower pay rates, it is likely to mean a saving of approximately £0.06 per hour, for those on higher rates the changes will mean an increase of a few pence per hour.

Matthew Sanders, CEO of de Poel said “Working with some of the biggest users of temporary agency labour in the country has shown us that there are some significant savings to be made through the changes to freepay.”

“We have calculated that our clients alone could save over £700,000 through the changes, and businesses throughout the UK could save millions. Companies need to ensure that the agencies supplying their temporary workers are passing on this saving”

For more information about the National Insurance contributions changes visit www.depoel.co.uk.

Freepay calculations are as follows:

Example calculations on £6.25 pay rate:

Current method (pre April 2011):
Pay £6.25 per hour x 37.5 hour working week = £234.38 weekly earnings
Less £110 ENI (Employers National Insurance ) freepay amount = £124.38 to which ENI applies
Multiplied by 12.8% ENI = £15.92 weekly ENI
Divided by 37.5 hours = £0.42 hourly Employers National Insurance

New method (post April 2011):
Pay £6.25 per hour x 37.5 hour working week = £234.38 weekly earnings
Less £136 ENI freepay amount = £98.38 to which ENI applies
Multiplied by 13.8% ENI = £13.58 weekly ENI
Divided by 37.5 hours = £0.36 hourly Employers National Insurance

Example calculations on £15.00 pay rate:

Current method (pre April 2011):
Pay £15.00 per hour x 37.5 hour working week = £562.50 weekly earnings
Less £110 ENI freepay amount = £452.50 to which ENI applies
Multiplied by 12.8% ENI = £57.92 weekly ENI
Divided by 37.5 hours = £1.54 hourly Employers National Insurance

New method (post April 2011):
Pay £15.00 per hour x 37.5 hour working week = £562.50  weekly earnings
Less £136 ENI freepay amount = £426.50 to which ENI applies
Multiplied by 13.8% ENI = £58.86 weekly ENI
Divided by 37.5 hours = £1.57 hourly Employers National Insurance