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Agency Construction Workers to Pay Higher NI Contributions

14th April 2014

New rules for the payment and registration of National Insurance Contributions will come into force this month and are expected to affect around 200,000 construction workers who are employed via an agency. After years of PAYE and NI contributions for the self-employed sitting at 9%, the figure will now rise to 12%.

Previously, when hired through an agency, the worker was still classed as self-employed for taxation purposes and paid the lower rate for Class 1 contributions. The new regulations will now also deem the agency liable for 13.8% (secondary contributions) where there previously was no contribution due from them.

The new rules, set by the Finance Bill 2014 declare that if a worker ‘personally carries out work or is involved within the provision of the services’ via an agency, then all salary payments will now be subject to payroll, with the relevant tax and NI contribution deducted before payment by the agency. Effectively, this will make the agency the employer.

It is not yet clear how these new regulations will affect construction staff agencies and the way they operate. A common prediction in the industry is that agency rates will rise in the immediate future to compensate for the extra costs and resources that they will inevitably expend in the ‘shake-up’.

The situation is quite likely to cause some unrest across the industry, just as construction begins to enjoy a sustained period of growth and recovery. The full effects of the changes may already be felt within some sectors, which rely upon agencies to employ the bulk of their workforce. Even though the flexibility of agency staffing is attractive, with many short-term and temporary contracts being issued, it may be that more companies will look towards direct employment of workers in the near future if agency fees rise.

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