An increase in the amount of national insurance employers could cost Reading Borough Council more than £500,000.
National Insurance is a tax to fund vital care services such as the NHS by which money is deducted from wages by employers into government coffers.
The rate of national insurance taken from employers is currently 13.8 per cent.
The Labour government announced national insurance contributions will rise to 15 per cent during the announcement of its first budget in October.
The increase would cost the council £1.663 million from its general fund and approximately £283,000 from its Housing Revenue Account for the 2025/26 financial year when the rise is introduced.
However, all of that amount is due to be paid by the government.
Yet the National Insurance contribution increase is still due to have a financial impact on the council as it uses contractors to fulfil services it has a duty to provide.
The National Insurance contribution increase for employers will be introduced in April 2025.
The issue was raised by councillor Anne Thompson (Liberal Democrats, Tilehurst) who asked what implications the increase in national insurance could have at a Reading Borough Council policy committee meeting.
Liz Terry (Labour, Coley), the council leader, replied: “The council has received written confirmation from the Ministry of Housing, Communities and Local Government that the Government has set aside funding to protect public sector employers, including local government, from the changes to employer’s national insurance contributions that were announced as part of the Budget.
“The methodology for calculating and allocating this funding has not yet been announced but the Council is anticipating that this will materialise as part of the Provisional Local Government Finance Settlement.”
The local government finance settlement determines how much government funding councils receive.
While the council as an employer will have its raise paid for by the government, that will not apply to its children’s service company Brighter Futures for Children (BFfC) contractors or care and education providers.
Cllr Terry explained: “The current estimated additional cost of these changes for 2025/26 for BFfC is therefore £517,000.
“The council does intend to lobby the government on this matter as the company was set up under a government direction and therefore our view is that the council should not now be financially penalised as a result.”
The final cost implication on the council is estimated to be higher than £517,00, but no definitive estimate has been provided yet.
Furthermore, cllr Thompson asked what implications the increase in the minimum wage to £10 per hour and the introduction of the national living wage of £12.21 per hour would have.
However, cllr Terry was unable to provide figures for the impact that would have on the council’s finances, as calculations for the 2025/26 year have not been finalised.
She explained: “The council is likely to come under pressure from the care sector where providers will likely try to negotiate higher rates to cover their increased costs.
“An uplift for provider contractual inflation will be considered as part of the council’s 2025/26 budget and the 2025/26-2027/28 medium term financial strategy process.”
All of the changes will come into effect on April 1, 2025.
The impact of wages for BFfC will continue until the company is brought under council control in 2026.
