Nearly nine in ten charitable organisations say they are concerned about affording the government’s increase to the rate of Employer National Insurance Contributions (ERNICs) from 6 April 2025.
The results of a survey conducted by Charity Finance Group (CFG) in November show that most charities (87%) are concerned about their organisation’s ability to afford the additional costs of ERNICs on top of the rises in the National Living Wage (NLW) and National Minimum Wage (NMW), with half of those saying they are concerned ‘a great deal’.
Most charities (80%) said they are now having to explore ways to offset the increase in costs. This will include charities looking to do one or more of the following: increase fundraising efforts; apply for more grants; cut back on charitable services and activities; charge more for paid-for goods and services; hand back local government contracts; freeze pay; freeze recruitment and not backfill vacancies; and reduce staff headcount.
Six in ten (61%) respondents said that it is either likely or very likely that they will consider reducing their number of staff, by not renewing employment contracts or through redundancy.
Nearly seven in ten (67%) charities say they are likely or very likely to cancel the plans they had to expand or create new services and/or take on more staff due to the increase in ERNICs and lowering of the threshold.
The charities that responded to the survey cover a wide range of sectors and services, from hospices and providers of first aid, social and mental health care services, through to shelters for the homeless, and charities for those experiencing domestic abuse.
Caron Bradshaw OBE, CEO of CFG, commented:
“Since the budget announcement in October, thousands of charity leaders and finance professionals have expressed that they are desperately on the financial backfoot once more. I am very concerned about the financial health of the sector and its ability to weather yet more economic distress.
“They are having to move very fast to find ways to attempt to mitigate this unexpected and sharp increase in operating costs, so that they can be there for the people and communities they serve and to meet increasing demand. However, many have few remaining options available to them, having done everything possible to stay financially afloat during the pandemic and cost of living crisis.
“The results of this survey don’t make for easy reading. Charities are being required to absorb the rise in ERNICs and this comes with consequences. It is inevitable that many will cut services and activities, and headcount. 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.
“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.”
Richard Sagar, Head of Policy, CFG, comments:
“The rise in Employer National Insurance Contributions and the reduction of the threshold in the NI secondary threshold from £9,100 to £5,000 has come as a shock to many.
"Together with the increase in National Living and National Minimum Wages, these changes mean that charities are now quickly recalculating and reassessing their plans for 2025 and beyond.
"The rise in Employment Allowance is to be welcomed but many charities will not benefit from it. For those that will claim, it will still not offset the increase in ERNICs.
“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.”
ENDS
Notes for editors
About the survey
A total of 446 charity leaders and charity finance professionals of charitable or social change organisations took part in the survey which was conducted between 31 October and 22 November 2024. The respondents ranged from the smallest employers to the largest.
The size of organisations by headcount:
The respondent charities ranged from the smallest to the largest charities by headcount.
Small (1-25 staff): 25%
Medium (25-100): 33%
Large (101-500): 29%
Major (500+): 13%
The sizes of organisation by income were:
Small (£10,000-£100,000): 2%
Medium (£100,000-£1m): 23%
Large: £1m-£10m): 48%
Major £10m-£100m): 23%
Super-major (£100m+): 4%
Related news
CFG responds to Chancellor’s letter to sector, 26 November 2024 (CFG website)
How CFG is supporting members and the sector following the budget, 6 November 2024 (CFG website)
7,361 charities respond to joint sector letter to the Chancellor, 31 October 2024 (NCVO website)
For all media enquiries, please contact:
Emma Abbott, Communications Manager: emma.abbott@cfg.org.uk
Glyn Sheldon, Communications Officer: glyn.sheldon@cfg.org.uk.
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