Preparing Your Recruitment Agency for the 2025 National Insurance Increase
A collaborative article by AGPayroll & Firefish Software, featuring Chris Fahey, Founder & CEO, AGPayroll. Read the original article here.
From April 2025, changes to Employer National Insurance Contributions (NICs) will come into effect—and with them, a new layer of cost and complexity for recruitment agencies. Whether you run a temp-heavy agency or support contractors across multiple sectors, the financial impact of these changes will be felt across your margins, your client relationships, and your candidate experience.
At AGPayroll, we’ve always believed that payroll should be more than a process—it should be a strategic advantage. That’s why we’re working closely with partners like Firefish to ensure our clients can not only manage these changes, but use them as an opportunity to improve the way they run their businesses.
What’s Changing—and Why It Matters
In the government’s Autumn Budget, two key changes were announced that will affect all employers, including recruitment agencies:
The Employer NIC rate will rise from 13.8% to 15%.
The Secondary Threshold—the point at which NICs kick in—will drop from £9,100 to £5,000 per year.
That means agencies will be paying NICs on a greater portion of their workforce’s earnings, and at a higher rate. The impact is immediate and measurable: a contractor earning £30,000 per year, for example, will cost an employer an additional £865.80 annually under the new rules. Scale that across a contract workforce, and you’re looking at a significant increase in payroll costs.
As Chris Fahey, our founder and CEO, puts it:
“The NIC rate increase to 15% and the reduced Secondary Threshold will undoubtedly put a strain on agency margins. The challenge is to protect your profit while staying competitive. And that starts with preparation.”
Talking to Clients: Lead with Value, Not Just Numbers
We know that conversations about rising costs can be tough—but they’re essential. Many clients still see agency fees as fixed. So when costs rise, it’s vital to explain why.
This isn’t about boosting your margins—it’s about covering statutory increases mandated by government legislation. And it’s about protecting the service you deliver.
Our advice? Don’t wait. Start talking to clients now. Be transparent, but don’t stop at the numbers. Frame the discussion around the value you bring. Recruitment agencies are not just CV machines—you reduce time-to-hire, deliver talent that in-house teams can’t reach, and handle the burden of compliance.
And in a world where compliance risk is growing, that’s a service worth investing in.
“We’ve seen agencies use SafeRec reports to prove their payroll compliance and even win new business. It’s not just about doing things right—it’s about showing you do things right.”
— Chris Fahey
If clients push back on rate increases, explore options. Could a long-term contract help them lock in lower costs? Could you offer multi-role discounts while protecting your base margin? These kinds of structured, proactive conversations help strengthen client trust—and protect your business.
Supporting Contractors Through the Change
Candidates may not immediately understand how the NIC changes affect them—but they will feel the impact. If you’re reducing rates or changing contracts, communication is key.
This is your chance to strengthen candidate relationships—not damage them.
Start by educating your contractors. Explain why contract values might change and what the broader market is doing. Be honest, but supportive. If you don’t have the conversation, your competitors might—and they’ll win the trust.
Next, offer practical support. That could mean introducing flexible pay structures, offering completion bonuses, or even helping them manage personal budgeting with templates or financial advice. AGPayroll’s platform already offers self-serve access to payslips and real-time support—so contractors get fast answers and fewer surprises.
“We believe candidate experience starts with transparency. Our app means they don’t have to sit on hold wondering why they were paid for 40 hours instead of 45. They can see it, ask about it, and get clarity—fast.”
— Chris Fahey
Preparing Your Agency Internally
Operationally, these changes require more than financial planning—they demand agility. Your consultants need to understand the legislation so they can talk about it with confidence. Your finance team needs accurate forecasting tools. And your payroll process needs to be bulletproof.
Training is essential. Equip your team with the knowledge to reassure clients and contractors alike. Build talking points. Anticipate objections. Align your messaging.
You’ll also need to revisit your cost model. Use data to assess where you can improve efficiency, reduce unnecessary spend, and protect your margins.
And if you haven’t already outsourced your payroll—now might be the time. AGPayroll offers a fully integrated solution with SafeRec audit trails, HMRC gateway syncing, and contractor and agency portals. It’s not just compliant—it’s seamless.
The Bigger Picture
These NIC changes will test the recruitment sector. But they also offer an opportunity to step up—to operate with greater clarity, stronger systems, and a sharper focus on the value you provide.
If you use this moment to have better conversations, tighten your operations, and invest in your people, you’ll come out ahead.
“This isn’t just about adapting to a change in tax law. It’s about building a smarter business—one that’s fit for the future.”
— Chris Fahey
Want Support Navigating the Changes?
AGPayroll and Firefish are working together to help agencies like yours prepare for the road ahead—combining best-in-class CRM and payroll technology with clear, actionable advice.
📅 Book a Consultation with AGPayroll
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