Preparing for Change: An Agency Checklist Ahead of the NI Increases

As April approaches, recruitment agencies across the UK will face a significant challenge: the rise in National Insurance (NI) contributions. The legislative change could amplify existing pressures on profitability. With careful planning and strategic adjustments, agencies can mitigate the impact immediately and longer term. Along with our live podcast from the Workwell Outsourcing Academy, we explore key areas to address, offering practical steps with our checklist below, to prepare for and adapt to this financial shift and beyond.

Listen to the podcast here

Steps to Manage NI Costs

• Assess Absorption vs. Cost Transfer – Conduct financial forecasts to determine the feasibility of absorbing costs
• Review Contract Terms – Check your ToB! Ensure your contractual agreements allow for passing legislative changes or government increases to the client.
• Review Charge Rates – Determine necessary rate increases to your clients.
• Client Communication – If the costs are passed to the client, ensure you communicate effectively with your client, reach out quickly. You want to maintain these trusting long-standing relationships.
• Renegotiate – If the contract doesn’t stipulate charge increases will be passed to your client, renegotiate your contract so this is covered going forward.
• Analyse company arrangements – Assess the impact of PAYE vs. Umbrella arrangements to optimise NI liabilities while remaining compliant.
• Salary Sacrifice– Implement salary sacrifice arrangements for benefits like the cycle-to-work scheme and car allowance. By sacrificing a portion of the salary for these non-cash benefits, employees can enjoy savings on tax and NI contributions, while employers benefit from reduced NI liabilities.

Other steps to consider

• Utilise Employment Allowance – If you’re eligible, take advantage of the increase from £5,000 to £10,500 to reduce your annual National Insurance liability.
• Outsource Non-Core Functions – Reduce overheads by outsourcing IT, payroll, compliance, and admin tasks.
• Implement Employee Share Schemes – Introduce equity-based incentives to manage salary increases and other costs, while boosting retention.
• Audit Internal Processes – Identify inefficiencies and streamline back-office functions.
• Automate Operations – Invest in technology to reduce manual tasks such as payroll, compliance tracking, onboarding. Reducing human error and saving time!
• Consolidate Systems – Integrate back-office platforms to streamlined processes, cut costs and improve data accuracy.
• Cashflow – Review cashflow options. Consider your funding options and introduce early payment incentives from your clients, such as small discounts.

By taking these proactive steps, recruitment agencies can not only manage the NI increase but also improve overall business resilience and efficiency for the upcoming year. For more information, please visit Workwell Outsourcing Academy. For a more consultative conversation, please contact us by filling in the form below, we’d love to discuss how Workwell Outsourcing can help.