Council / National insurance changes could cost SIC an extra £2m
Funding will be available to councils to offset the rise – but it will not fully cover the cost
CHANGES to national insurance for employers introduced by the new Labour government could stand to cost Shetland Islands Council around an extra £2 million.
While some money is expected to come the council’s way to cover this extra cost, it will not be fully funded.
Speaking at a council meeting this week finance manager Paul Fraser said there are two main elements of the upcoming national insurance changes.
One was the “headline” rise in employer contributions, and the other was a change to thresholds which Fraser said could have as much of an impact.
A 1.2 per cent rate increase and a reduction in the threshold at which point employers begin paying were included in the Labour government’s budget for 2025/26.
This stands to affect businesses across the UK, including local authorities.
Fraser said calculations predict the SIC’s national insurance bill could increase by around £3.3 million in the next financial year.
This is effectively the difference between much the SIC spent in 2024/25 on national insurance and the forecast spend in 25/26.
He said this roughly equated to around a £2 million increase relating to the changes announced by government last year.
“Our national insurance bill would have naturally gone up,” Fraser explained.
“I think approximately we can probably say about £2 million of that £3 million relates to the change, and we would have naturally seen something like £1 million of an increase.”
Fraser said around £144 million had been identified by the Scottish Government to cover national insurance rises for councils, but the total impact could be around £240 million.
“So around about 60 per cent contribution is expected,” he said.
Speaking outside the meeting, SIC chief executive Maggie Sandison said the extra government funding would be for rises associated with directly employed staff.
She said a concern nationally was that a lot of councils outsource services such as care and refuse.
“If the funding is only going to pay towards the cost of direct employees there will be quite a gap for some other councils around how much additional contract costs may come,” Sandison said.
Although the SIC does have some contracts, such as bus services and to the voluntary sector, it mainly has directly employed staff.
“We will see some increase in contract costs but maybe not to the extent that some other councils will see,” the chief executive said.
“We don’t yet know how much exactly our allocation will be from the Scottish Government for direct employee costs but clearly we expecting to get some payment towards that.”
Sandison added that the UK Government said to local authorities in England that it would play for employee costs – but the public sector in Scotland is much larger than the one in England.
Become a member of Shetland News
Shetland News is asking its readers to consider paying for membership to get additional perks:
- Removal of third-party ads;
- Bookmark posts to read later;
- Exclusive curated weekly newsletter;
- Hide membership messages;
- Comments open for discussion.
If you appreciate what we do and feel strongly about impartial local journalism, then please become a member of Shetland News by either making a single payment, or setting up a monthly, quarterly or yearly subscription.
Already a member? Sign in to hide this message.
