Three in five charity employers are expecting to have to consider reducing their number of staff due to the government’s recently announced increase to the rate of employer national insurance contributions (NICs) and minimum wage rate rises.
The results come from a survey, conducted by the Charity Finance Group (CFG), which show that 87% of employers in the sector are concerned about their organisation’s ability to afford the increased costs.
Chancellor Rachel Reeves announced in her first budget, in October, that employer NICs will increase from 13.8% to 15% from April 2025, and later confirmed there would be no exemptions or reimbursements based on charitable status.
Reeves also lowered the threshold above which employers will be liable to pay NICs from £9,100 to £5,000 from next April.
An open letter signed in November by more than 7,300 charities and voluntary organisations warned that charities overall will face increased costs of £1.4bn and asked for the government to reconsider.
Four in five respondents to CFG’s survey said they were planning to offset the increase in costs by considering increasing fundraising efforts, applying for more grants, cutting back on activities, charging more for goods and services; handing back public contracts, freezing pay and reducing staff headcount.
Three in five respondents said that it is likely that they will consider reducing their number of staff, either by not renewing employment contracts or through redundancy.
Some 67% said they were likely to cancel plans to expand or create new services or hire more staff due to the NICs increase and lowering of the threshold.
The survey was completed by 446 leaders and finance professionals of charities, all of which employed at least one member of staff while most had an annual income of more than £1m.
‘Inevitable that many will cut services’
CFG chief executive Caron Bradshaw said the survey’s results “don’t make for easy reading”.
“It is inevitable that many [charities] will cut services and activities, and headcount,” she said.
“This will have an immediate impact on those who rely on our sector which is too often plugging the gaps in public services and acting as a safety net for the most vulnerable in society.”
Reeves’ budget announcements came shortly after prime minister Keir Starmer has announced plans to produce the Civil Society Covenant, setting out a new working relationship between the state and the sector.
Bradshaw said: “The government is right in saying that its decade of renewal cannot happen without our support. We are pivotal to all areas of a well-functioning society.
“We believe we are valued by government, and we appreciate the difficult choices that are needed, but we need the government to truly understand and consider the impact of their financial and economic decisions on our sector.
“We urge them to work closely with the charitable sector, to find ways together to mitigate the risk of many vital services and organisations closing in the coming year.”
CFG head of policy Richard Sagar said: “We will continue to work with government policy-makers to ensure the voice of our sector is heard and that charities are supported in every way possible so that they can continue to make the biggest difference possible in their communities.”
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