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Budget is going to cost recruitment sector and contractors a bundle

Journalist: Kate Steiner-Dicks, Freelance

ended 18. September 2024

The upcoming Autumn budget could cost recruitment agencies a bundle

The upcoming Budget could significantly impact:

  1. recruitment agencies
  2. temp workers
  3. umbrella company contractors 

How? Through proposed reforms, including increased employer National Insurance contributions on pensions, closing tax loopholes, and changes to Capital Gains Tax. These shifts could drive up costs for businesses and contractors, directly affecting take-home pay and operational expenses.

QUESTIONS
·       How do you think a possible hike in employer National Insurance contributions could impact the recruitment industry and overall job creation for your clients? Do you foresee any threats to job security within recruitment agencies? 


·       National Insurance and tightening tax loopholes, how might these changes affect umbrella company contractor pay? Do you expect contractors to negotiate for a higher rate to compensate for the additional costs?

2 responses from the Newspage community

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Editor
Mary Maguire
Managing Director at Astute Recruitment Ltd
Successful temporary recruitment is the lifeblood of businesses - why would the newly elected Government want to kill it?

Employers NI for permanent and fixed term contractors are shouldered by the recruitment agency's clients, the burden falls to Recruitment businesses for all interims unless outside IR35.

A fair NI tax burden is acceptable but for the new government to tap into the Recruitment sector and make already squeezed margins even tighter will create immense impacts to business and industry! Surely that is self-defeating for the New Government as they have stated many a time they are the party for business!
Temporary and Interim appointments create flexibility for businesses to pivot on turnkey projects, client strategies, provide sickness and maternity cover, and much, much more which all serve to improve profits, growth & job creation!

Unlike what 'happens in marbs stays in marbs', an NI tax hike won't just affect the Recruitment sector.
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Ketan Dattani
CEO and Founding Owner at Ketan Dattani
A potential hike in employer National Insurance contributions could significantly impact the recruitment industry, especially in specialised sectors like environmental health. For instance, a 1% increase in National Insurance could add approximately £1,200 in annual costs for an employer per employee earning £40,000, leading many businesses to reconsider their hiring strategies. According to the Recruitment and Employment Confederation (REC), this could slow down job creation, as more than half of businesses already cite rising costs as a barrier to hiring.

Moreover, tightening tax loopholes may make umbrella companies less appealing to contractors. Currently, around 15% of contractors use these companies, but with potential reductions in take-home pay, many may seek to negotiate higher rates to compensate for increased deductions. This could push rates up by 5-10% as contractors aim to maintain their income levels, which might strain client budgets and affect recruitment margins.