Briefing: Impact of National Insurance Increase on VCFSE Sector in Greater Manchester
The total estimated additional cost to the Sector in GM as a whole could be in the region of £38 million.
In the Autumn Budget 2024, the Government announced its plans to increase employer National Insurance (NI) contributions from 13.8% to 15%, alongside a reduction in the Secondary Threshold to £5,000, which could increase the cost of employing staff for those with lower-paid roles or part time workers.
The VCFSE sector is already contending with rising wage demands, contracts that haven’t kept pace with cost increases and now faces an additional financial challenge. This additional pressure is estimated to cost each VCFSE employers on average between£20,000- £50,000 per annum to their budgets next year. The total estimated additional cost to the Sector in GM as a whole could be in the region of £38 million.
These additional costs will exacerbate existing financial pressures and threaten to weaken the delivery of community-led support and services. Those organisations, previously in a position to increase capacity and impact, will now face a barrier to growth. This will create challenges for expanding the role of the VCFSE sector in GM’s strategic priorities under the GM Live Well Trailblazer and Good Growth Plans.
Whilst there is a level of consensus on the potential impact there is variance of views on the merits of lobbying nationally for a different decision and/or to focus locally on how to mitigate the impacts together.
VCFSE sector leaders have highlighted that the following would demonstrate positive system support to mitigate the impacts.
1. Ensuring in the current round of contract /service contracting that there are annual uplifts to contract or grant payments in line with inflation, tax increases and other employment costs are properly considered. Where this can’t be implemented a joint risk plan should be put in place to jointly manage the risks. (This would be in line with commitments made by GMCA in the GMCA’s Fair Funding Protocol and will enable VCFSE organisations to maintain their commitment to Real Living Wage Accreditation and the GM Good Employment Charter.)
2. Working with VCFSE partners to understand and share risks to delivery of services in communities and impacts on the citizens of GM. This includes the offer that residents receive outside of public sector commissioned services as well as those that do.
3. A clear commitment to be made to mitigate the risks of commissioning decisions that 'keep services in-house’ within institutions that are exempt from the NI increases.
4. Continue to advocate with VCFSE leaders for NI policy adjustments or exemptions at national level.
