What’s still to come for recruiters in 2025
News from our business partners
This is a guest blog by REC business partner Brookson Group
The Autumn Budget last year introduced significant changes for the flexible workforce which, come April, will start taking affect. The rise in employer National Insurance contributions (NICs) and new measures targeting non-compliance in the umbrella market could reshape recruitment dynamics for those working with contractors and freelancers. Agencies should be prepared for the changes and adapt to sustain growth in a challenging landscape.
Impact on umbrella employees
A 1.2% rise in employer NICs and a reduction of the NI secondary threshold from £9,100 to £5,000 may affect the 700,000 workers employed through umbrella companies. While the government assures that take-home pay will remain unaffected, umbrella companies operating on slim margins are unable to absorb the cost. If client rates don’t adjust, workers could see reduced earnings.
Some workers may push for renegotiations, while others might opt for contracts outside IR35, impacting agency talent pools. Businesses could also reassess IR35 policies to attract skilled professionals through outside-IR35 contracts. Agencies will need to be prepared to navigate these shifts to maintain contractor access.
Managing cost pressures and demand shifts
Higher employer NICs will likely push clients to reduce costs, potentially squeezing recruitment agency fees and profitability. Agencies must communicate the direct financial impact of employer costs on inside-IR35 assignments to their clients and highlight the potential savings of outside-IR35 classifications. On a positive note, the rise in NICs may drive increased demand for temporary and freelance roles, offering agencies opportunities for revenue growth. Recruiters should be ready to expand their talent pools and provide competitive pay rates to meet evolving client needs.
Tackling non-compliance in the umbrella market
The government aims to curb non-compliance in the umbrella market, placing greater accountability on recruitment agencies. Under proposed rules, agencies engaging workers via umbrella companies will be responsible for ensuring PAYE compliance and covering any payroll shortfalls.
While details remain unclear, and changes are unlikely before April 2026, agencies should act now. Establishing a vetted supplier list, conducting due diligence, and reviewing IR35 policies will help mitigate risks and ensure compliance before new regulations take effect.
What’s next?
The next weeks and months could be a turning point for the flexible workforce so agencies should be proactive in ensuring they can navigate changes successfully and continue to operate in the flexible labour market.
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