Dear colleague

Following the budget last week it became obvious that there is a serious financial implication for parish and town councils with the reduction in NI allowance for employers. We have been in communication with NALC regarding this and, unfortunately, it seems that government are unlikely to waive the reduction for our sector.

Therefore, when budgeting, please take into account the additional NI payments that will be needed if any staff are paid above the new threshold of £5000. Please also be aware that the NI rate is increasing from 13.8% to 15%.

NALC will continue to lobby on behalf of the sector on this.

NALC’s communication to us for reference is as follows:

As you will know there were significant changes to employer’s national insurance contributions in last week’s budget.  We have been pressing MHCLG officials for clarification and after initially saying they thought our councils would be compensated they emailed us yesterday the following unhelpful reply:

“Following up on our exchange yesterday about this, I wanted to confirm the position we’ve got to with Treasury on the Budget increase in Employer National Insurance contributions and what it means for parish and town councils. I'm writing to confirm that town and parish councils will not be included in a package to compensate public sector bodies for this rise.

The policy set by the Chancellor is to compensate those who are direct public sector employees funded out of public money. Parish councils are not directly funded by central government and so do not fall into this category. I know that’s not the answer you were hoping for.

We recognise that this will require town and parish councils to make some difficult financial decisions, and in particular that many may need to raise their precept, and that some may need to make staffing cuts in order to meet these new costs. We understand neither of these decisions will be taken lightly by your members.”

Below is some modelling:

a parish council with an employee earning £9,100 will face an additional £615 cost next year, a 6.75% increase in their staffing costs before adding any pay increase.

For larger councils, the impact is going to be at least £615 per member of staff, in addition to the 1.2% increase in contributions above £9,100.

Even a parish council with an employee on £6,000 a year will find itself paying employers NI of £150, which requires a 2.5% increase in staff budgets in addition to any pay increase.

We will obviously update you with any progress on this issue.

Kind regards

Wendy Amis

Chief Officer

DerbyshireALC