From April 6th 2025, the rate of Employer’s National Insurance (NI) will be increasing from 13.8% to 15%. In this article, we examine the potential implications of this increase on umbrella company employees and provide some examples of take-home pay before and after April 2025. We also provide advice to umbrella employees to ensure the rise has a minimal impact on their pay. Keep reading for more information.
Employer’s NI and the employment costs
As the employer of contractors and freelancers for payroll purposes, umbrella companies like Umbrella Company UK are responsible for the employment costs – the Apprenticeship Levy (0.5%) and the Employer’s National Insurance Contributions (13.8%, rising to 15% from April 2025).
Our umbrella company employees do not work for us; they work for their end-hirer. As our role in the supply chain is to provide compliant employment for PAYE payroll purposes, we cannot cover the employment costs. However, any temporary worker using an umbrella company for their payroll should receive an inflated assignment rate, which accounts for the employment costs.
For example, only a few recruitment agencies provide an in-house PAYE service. However, the ones that do are likely to offer two rates to temporary workers – a rate for agency PAYE and an inflated assignment rate for workers who use an umbrella company (if an umbrella is an option).
Examples (pre and post-April 2025)
How could the rise in Employer’s NI impact the take-home pay of contractors and freelancers using an umbrella company? With the upcoming Employer’s NI rise to 15%, the take-home pay for umbrella employees will fall without an uplift in the assignment rate.
Here are a few examples*:
Daily Rate – £120
- Weekly take-home pay during 2024/25 tax year – £428.66
- Weekly take-home pay during 2025/26 tax year – £419.43
Daily Rate – £250
- Weekly take-home pay during 2024/25 tax year – £816.82
- Weekly take-home pay during 2025/26 tax year – £801.34
Daily Rate – £500
- Weekly take-home pay during 2024/25 tax year – £1,402.16
- Weekly take-home pay during 2025/26 tax year – £1,390.82
Daily Rate – £750
- Weekly take-home pay during 2024/25 tax year – £1,953.72
- Weekly take-home pay during 2025/26 tax year – £1,931.16
What should contractors and freelancers do regarding the rise in Employer’s National Insurance?
From April 2025, the rise in Employer’s National Insurance will result in the employment costs rising. Therefore, whether you are a contractor using Umbrella Company UK or any umbrella company in the UK, we strongly advise you to initiate a conversation with your recruitment agency (or end-hirer if there is no agency) to discuss whether your assignment rate will be increased to cover the 1.2% rise in Employer’s NI.
Sarah O’Toole, director at Umbrella Company UK, is hopeful umbrella employees will receive an uplift in their assignment rates after April 2025:
“It’s frustrating to see the government’s decision to increase Employer’s NI without considering the impact on the hundreds of thousands of temporary workers using umbrella companies.
Umbrella companies continue to provide an extremely valuable service – helping workers get paid compliantly and efficiently. However, by failing to consider umbrella employees in the Budget 2024, the government has let down temporary workers by failing to acknowledge the wonderful work they do to boost the UK economy.
As a compliance-driven umbrella, Umbrella Company UK will always ensure our workers are paid compliantly with HMRC’s rules and regulations. I am hopeful that responsible and ethical recruitment agencies will already have processes in place to ensure that candidates post-April 2025 will receive an inflated assignment rate to account for the rise in Employer’s NI. The last thing I want to see is our employees out of pocket due to the increase in employment costs.”
Request a take-home pay calculation today
Umbrella Company UK is an FCSA accredited and SafeRec certified umbrella company with a commitment to compliance and customer service. We’re proud to have helped thousands of contractors and freelancers get paid compliantly and efficiently. We’re delighted to have exceptional online reviews on both Google (4.3/5.0) and Trustpilot (4.8/5.0), and we recommend you check them out!
*These calculations are for illustration purposes only and should not be treated as fact. The calculations are based on a £20 per week umbrella margin, 48 working weeks in the year, no expenses reclaimed, holiday pay processed and paid each payment frequency and auto-enrolment for pensions. To request a free, tailored take-home pay calculation from Umbrella Company UK, please call our Sales Advisers on 01707 669023, or request a calculation here.