Umbrella workers hit hard with NIC increase

The proposed increase in National Insurance Contributions (NICs) for umbrella workers is almost double that for 'regular' workers, according to the membership body for the supply chain, the Freelancer and Contractor Services Association (FCSA).

It is widely known that the Chancellor has imposed an increase in both employers' and employees' National Insurance Contributions (NICs) to take effect from April 6, 2022. The increase being imposed is 1.25 percentage points meaning the actual rise is about nine per cent for employers and 10 per cent 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.

The FCSA says 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 per cent of their current take-home pay rather than the 1.25 per cent of regular employees. This is at the time of spiralling inflation and massive rises in gas and electricity bills.

The FCSA called on recruitment agents and their end-clients to step up to the plate and increase assignment 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.

Taking an example of someone who earns £50,000 a year:

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.

A spokesman for the FCSA said: "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."