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Given Manchester United’s recent form, the ultimate decision for the club to part ways with their manager Erik ten Hag is unlikely to have shocked many supporters. Whilst there is clearly no suggestion that Budget speculation has played a factor in such a critical decision, it does serve as a high-profile illustration of an issue that other businesses both in and outside of football may take note of. 

In taking action early, the board at Manchester United may inadvertently save the club hundreds of thousands of pounds in employers’ National Insurance contributions (NICs). As it stands, the rate of employers’ NICs is 13.8% and based on recent speculation, it is anticipated that this could be increased by an amount between 1% and 2% in the Budget. 

This would not be the first time in recent years that we have seen a change to employers’ NICs, with the last being a reduction in the rate from 15.05% to 13.8% on 6 November 2022. That earlier change is summarised in a previous 91̽»¨ article and relates to a tax cut announced in the ‘mini-Budget’ on 23 September 2022 during Liz Truss’s premiership. 

Given recent history of changes to both employers’ and employees’ NICs rates, it is likely that employers would be given at least six week’s grace by Rachel Reeves before any Budget changes to employers’ NIC are introduced. This is because it could take that long for payroll software systems to be updated.

The applicable employers’ NICs rate is likely to be that which applies at the time the termination payment is made, rather than that applicable at the date of the termination of the employment contract. Assuming agreement can be reached between the parties and payment is made within the six weeks, the current rate of employers’ NICs is likely to be applicable. 

It is not known what the severance package is in this case but to provide an illustration, in an example involving a severance package of £10m and a 2% increase to employers’ NICs, the potential savings could be in the region of £200,000.

This is clearly an extreme example, but it highlights the wider point that employers looking at reducing staff numbers may be inclined to accelerate such a process to mitigate the impact of an NICs rate increase. For smaller football clubs, Rachel Reeves could trigger the starting gun on the annual football manager sack race.