FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
Stuart Conroy, Commercial Director of Peartree Cleaning Services on how the rise in Employers National Insurance Contributions in April will impact the commercial cleaning industry
The increase in Employers National Insurance Contributions (ENICs), which are due to come into force in April is a challenge for all employers and will significantly impact those businesses operating within the commercial cleaning sector. Whether small enterprises or large corporations, we are all working out how to navigate the significant increase in ENIC payments.
Peartree employs over 1,400 cleaning operatives, and we know that our success relies on them. The new wage and ENIC changes are going to hit businesses like ours hard. We have approximately seven per cent vacancies, all currently being covered by existing employees working two roles with us e.g. a part-time morning cleaning role and then returning for an evening shift.
From April, the rate paid by employers will increase from 13.8 per cent to 15 per cent and the secondary threshold will be reduced from £9,100 a year to £5,000 a year, meaning that all of our colleagues will breach the threshold in their first role, impacting our ENIC liability and our profitability to the tune of an additional £800,000 in the tax year 1st April 2025. Organisations will be impacted further by a 6.7 per cent increase in National Living Wage (Minimum wage) or alternatively 5-5.3 per cent in Real Living Wage.
PART TIME PICTURE
For businesses like ours, employing mainly part-time workers, it’s hard to make the figures stack up. Our ENICs will increase from £900,000 to a staggering £1,700,000 for the period April 2025 to March 2026. Many businesses will have to consider fewer hours for workers, reduced benefits, pay freezes for management staff and higher charges to our clients. It may go further and result in redundancies.
At Peartree we offer a low skill level entry, and flexible working, for people seeking a job that fits around their childcare needs, supplementary incomes, and education. A part-time cleaning operative working 16 hours a week, earning £9,520 a year, will now cost us 13.2 per cent more due to these changes. It’s a steep rise that makes part-time work disproportionately expensive, and it’s going to be felt across the commercial cleaning sector. Surely, a better solution would have been to leave the £9,100 threshold, and increase the percentage taxed, or stagger the increase over the Government’s first five-year term, reducing the threshold by £1000 per annum, and allowing businesses time to adjust.
BUSINESS RESPONSE
Confederation of British Industry Chief Exec, Rain Newton-Smith confirmed that firms face tough decisions on hiring and investment due to the Budget and condemned the way firms have been blindsided by the increase in ENICs and the lowering of the threshold at which they start to be paid.
The increase in ENICs will undoubtedly influence employment patterns within the industry with organisations responding to higher labour costs by reducing staff numbers, cutting back on employee benefits, or freezing wage increases. This situation creates a challenging environment for workers who already contend with lower wages and precarious employment conditions. The squeeze is clearly being felt across all sectors in the UK. Retailers have already warned of higher prices and according to the Independent, Sainsbury’s have confirmed that they will be forced to cut 3,000 jobs in the UK as a result of the budget, which will cost them £140 million in higher wages and higher employers’ national insurance payments.
As Lord Wolfson (Next PLC CEO) put it: “We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.” The knock-on effects will in turn push up inflation and ultimately, UK citizens will have their finances squeezed – again!
The British Chambers of Commerce (BCC) said that the labour market figures, and its own surveys, showed “the warning lights on recruitment, employment and training are already flashing,” and added that, “our latest survey paints a worrying picture of weak workforce growth, persistent hiring difficulties and cuts in workplace training”. It also revealed that 55 per cent of firms are planning to put up prices, with labour cost the main driver.
At the end of 2024 there were 812,000 job vacancies in the UK with 1.6 million unemployed. With the introduction of the new ENICs thresholds it seems unlikely that we will be able to fill the 15 per cent shortage in the service sector any time soon. How many of those unemployed will want to work in the cleaning industry, with 800,000 other jobs to choose from?
The increase in ENICs clearly represents a significant hurdle for all of us in commercial cleaning, impacting everything from operational costs to employment dynamics. As we attempt to navigate this landscape of increased financial pressures, adaptation, resilience and strategic planning will be key to staying profitable.
