As we approach the start of the new financial year, recruitment agencies need to prepare for significant employment law changes that will take effect on 6 April 2025. These changes will impact the cost profile for all current and future contractors engaged via agency payroll or umbrella companies.
These changes could affect agencies' and contractors' profitability and pay. Therefore, it is vital to understand and consider their impact before they take effect.
Key Employment Law Changes
1. Employers' National Insurance Contributions (NICs)
- Threshold Reduction – The threshold at which employers start paying NICs will decrease from £9,100 to £5,000, increasing employment costs.
- NIC Rate Increase – The employer's NIC rate will rise from 13.8% to 15%, further impacting overall payroll costs.
2. National Minimum Wage Increases
The government has announced wage increases across all age groups:
- Aged 21 and over: £12.21 per hour (Up from £11.44)
- Aged 18-20: £10.00 per hour (Up from £8.60)
- Aged 16-17 & Apprentices: £7.55 per hour (Up from £6.40)
3. IR35/Off-Payroll Working Rule Changes
- The 'small company' definition for IR35 exemptions is changing, expanding the number of businesses qualifying for exemption from off-payroll working rules.
- From 1st April 2025, a small company will be defined as one with:
- Annual turnover up to £15 million (previously £10.2 million)
- Balance sheet total up to £7.5 million (previously £5.1 million)
- Fewer than 50 employees (remains unchanged)
This means that more small businesses can engage PSC contractors “outside IR35” without having the liability or responsibility for making status determinations.
How Champion Can Help
Navigating these changes can be complex, but Champion is here to support. As a leading umbrella payroll provider, our team of experts can help ensure your agency remains compliant while minimising disruptions.
You can contact the Champion team today at 0161 703 2549 or info@championcontractors.co.uk.
www.champion-contractors.co.uk/