THE Labour Government’s changes to employers’ National Insurance (NI) contributions will cost one Scottish council more than £5 million, it has been revealed.
From April 1, 2025 the threshold at which employers pay NI on each employee’s salary will be reduced from £9100 per year to £5000 and the rate will rise from 13.8 per cent to 15 per cent. The increases are expected to raise over £25 billion.
Following the UK budget, Perth and Kinross Council has been doing the sums to calculate what the financial impact will be.
A Perth and Kinross Council spokesperson this week told the Local Democracy Reporting Service: “The estimated change in NI costs for PKC is £5.4 million.”
Councillor Ian Massie – who previously raised the matter – was concerned to hear of the impact.
The Perth City North SNP councillor said: “The planned increase in the employer’s contribution on National Insurance will have a big impact on many employers.
“I am concerned about the impact that this will have on our culture and sports trusts who are already under pressure, and the longer-term impact on the council, as suppliers are likely to increase the costs for their products and services meaning it costs more to simply keep doing what we already do.”
The news comes after a recent meeting of the council’s Scrutiny and Performance Committee – on Wednesday, November 20 – where councillors were told the National Insurance changes could mean a combined additional cost of £339,000 for the council’s three arm’s length external organisations – Culture Perth and Kinross, Live Active Leisure, and Perth Theatre and Concert Hall.
Culture Perth and Kinross chief executive Helen Smout said it would result in “around an extra £97,000 a year” which she said “feels eye-watering to us”.
Mrs Smout explained that with 80 per cent of Culture Perth and Kinross’ costs being on staffing and the remainder on fixed costs there was “very little wriggle room”.
The Culture Perth and Kinross chief explained: “Whenever there is a need to make a saving it will undoubtedly impact on staff because so many of the remaining 20 per cent of costs are fixed – they pay for things like IT, infrastructure, licensing, etc.”
Perth Theatre and Concert Hall chief executive Christopher Glasgow said: “Based on our current staff base it’s £58,000 that was not previously budgeted.
“So if we get back to our normal staff base – we currently have a recruitment freeze until we find out the result of our Creative Scotland funding – that would take us up to £67,000.”
Paying the Real Living Wage to employees has also had a “massive” financial impact on Perth Theatre and Concert Hall.
Glasgow told councillors: “We’re also still combating the move to Real Living Wage which we’re also working towards. At the moment, we’ve modelled a three per cent pay award in order to maintain differentials. The move to Real Living Wage last year was so significant that some of our staff received 14.6 per cent pay increases so that’s had a massive impact on differentials across the organisation.”
Meanwhile Live Active Leisure look set to face a six-figure increase come next April.
Live Active Leisure’s chief executive Paul Cromwell said: “We’ve worked it out at approximately £175,000. Again, it’s unbudgeted and obviously as we’re considered to be a public authority’s arm’s length external organisation we’re very interested in seeing how the funding support moves forward over the next month. I’m hopeful there’s going to be additional funding that will contribute to this additional cost.”
The UK Government has said the Scottish Government will receive funding through the Barnett Formula to support costs associated with changes to Employer National Insurance.
A UK Government spokesperson said: “The Budget delivered more money than ever before for Scottish public services and the Scottish Government receives over 20 per cent more funding per person than equivalent UK Government spending.
“It is for the Scottish Government to allocate this across its own public sector and meet the priorities of people in Scotland.
“It will also receive additional Barnett funding on top of this record £47.7 billion settlement as part of support provided in relation to changes to Employer National Insurance.”
