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by Shannon Pite

The government is potentially underestimating the full impact of National Insurance (NI) changes on the early years sector, the Early Years Alliance has warned. �į&�Բ�����;

This is due to what the organisation describes as a ‘mistaken’ belief among ministers that many providers will be able to claim Employment Allowance, which the Alliance argues is not necessarily the case for settings. 

From April 2025, employer NI Contributions will increase from 13.8% to 15%, while the per-employee threshold at which employers start to pay NI will be reduced from £9,100 to £5,000 per year.  

The government has sought to mitigate the impact of these changes by increasing the amount that employers can deduct from their NI bill through the Employment Alliance scheme from £5,000 to £10,500. It has also removed the £100,000 threshold for eligibility for the Employment Alliance scheme, expanding the scheme to all eligible employers with NI bills.  

However, although the government has responded to concerns about the impact of NI changes on the early years sector by claiming that , the Alliance is warning that, in many cases, this won’t be possible due to the eligibility criteria for this support.  

, if more than 50% of a non-charitable organisation’s work is deemed ‘public work’, and more than 50% of their income is public funding, they are designated as a ‘public body’ and cannot claim Employment Allowance (unless they are a charity) 

This, the Alliance has warned, is likely to apply to a growing number of early years providers as the expansion of the early entitlement offer continues and government-funded places make up a growing proportion of the services that settings provide.  

While it has been confirmed that public sectors, such as schools and the NHS, will be protected from the impact of NI increases, the same does not apply to organisations deemed to be ‘public bodies’ under the Employment Allowance schemes.  

The government has confirmed that it currently has no estimate of how many early years providers will be eligible for Employment Allowance when the National Insurance changes are introduced in April �į&�Բ�����;

Commenting, Neil Leitch, CEO of the Early Years Alliance, said: “Early years providers are stuck between a rock and a hard place. With the next phase of the entitlement expansion now just months away, we know that government-funded places are likely to account for the majority of many settings’ offerings to parents. It seems absurd, therefore, that as a result of this, many won’t be able to claim Employment Allowance because they will be deemed to be ‘public bodies’ – and yet, unlike public sectors, they will still be hit with the full force of the upcoming National Insurance changes in April.  

“With government now confirming that it has no estimates to support its suggestion that many early years providers will be able to claim Employment Allowance, we’re deeply concerned that ministers may well be underestimating the scale of the challenge facing our vital sector.  

“With our own research showing that providers will simply have no option but to raise fees and limit entitlement hours to mitigate the impact of April’s changes, there’s no question that without further government action, the upcoming changes to National Insurance are likely to hit both families and providers hard. As such, we once again urge the government to rethink its decision before it pushes even more settings to the brink.”