Charity employers, like private sector businesses, have been facing significantly rising operating costs over the last three years. The initial shock came with dramatic increases in energy prices at the outset of war in Ukraine. The cost of living crisis followed, which affected service demand for those charities working with people on lower incomes. The cost of living crisis also had a much wider impact on payroll as employees began to demand better recompense for their work in the charity sector which, it is generally agreed, has lower pay that the public and private sectors.  As shown in the Third Sector Trends Study reports of 2022, many employers were facing significant pressures to recruit and retain staff due to low pay – it looks likely that the situation will have deteriorated further by the time the study is repeated in 2025.

Two more challenges will soon hit charity employers. The first, which is welcome on many levels, is the rise in the UK Living Wage to £12.21 an hour in April 2025.  It is not known how many charity employees are working at this level of pay and that has become an urgent research priority for charity-sector watchers to find out how much this will increase overall pay roll costs. The second challenge arises from the 2024 Budget which has increased employers  National Insurance contributions significantly. National organisations representing the sector have lobbied the government, asking for the sector to be reimbursed for the extra costs but these have been rejected by the Chancellor.

In our region, Voluntary Organisations’ Network North East (VONNE) initiated work to assess the consequences of these changes for regional charity employers.  Martin Brookes, Chief Executive of VONNE approached Professor Tony Chapman of Policy&Practice to assist in calculating the likely cost to the sector.  The rise in employer National Insurance Contributions (allowing for factors such as the higher employer allowance)  is estimated to add £ 19.5 million to the costs of the workforce in North East England  2025/26.

It is possible to break down the figures further and produce estimates for each of the region’s Combined Authority areas.  In the much larger North East Combined Authority area, the cost is estimated at £ 15.6 million, while in Tees Valley Combined Authority it is £ 3.9 million.  In the NHS North East and North Cumbria Integrated Care Board (ICB), the increase will be almost £22 million.

As Martin Brookes’ VONNE report states:

“An already hard-pressed sector in the North East is going to face this £ 19.5 million increase in costs with no obvious ways to pay. This should be of concern to the whole sector as well as to those who rely on the sector, such as local authorities, the North East Combined Authority (NECA) and the Tees Valley Combined Authority (TVCA). It should also be of concern to the NHS Integrated Care Board (ICB) which relies on the sector to help tackle health inequalities.”

Full details can be found in the report together with an outline of the methodology used, drawing upon Third Sector Trends Study analysis from Policy&Practice and supported financially by the Community Foundation Tyne & Wear and Northumberland.

Click here to read the report: https://www.vonne.org.uk/impact-higher-employer-nics-north-east-charity-sector

If you want to know more about the Third Sector Trends Study, click here: https://www.stchads.ac.uk/research/third-sector-trends-in-england-and-wales/