We all deserve fair and equal access to justice – the right to seek and receive legal support, advice, and representation, when needed, regardless of whether we are in a position of power or wealth. Free legal advice services are crucial to making this a reality. But these services, already underfunded and overstretched, now face additional pressure following recent increases to employer National Insurance contributions (NICs). What can be done to mitigate the impact of these changes and to support the longer-term sustainability of the sector?
As part of the Autumn Budget 2024, the government introduced changes to employer NICs, which came into effect on 6 April. The main rate paid by employers rose from 13.8% to 15%, and the earnings threshold was lowered from £9,100 to £5,000 per year – meaning any wages above £5,000 are now subject to the increased rate.
These changes represent a significant cost increase for employers and will hit the free legal advice and wider charity sectors particularly hard, at a time when they are already facing the “triple squeeze” of rising costs, reduced funding, and greater demand.
While public sector employers have been exempted, charities have not – despite calls from NCVO, AdviceUK, and the thousands of charities they represent, for NIC reimbursements to be extended to the charity and advice sectors. NCVO estimates the changes will cost the charity sector an additional £1.4 billion annually, while AdviceUK’s Advice Saves campaign found nearly two-thirds of organisations expect to reduce or cut services due to rising costs and insufficient funding.
One potential silver lining, especially for smaller organisations, is the increase in the Employment Allowance – from £5,000 to £10,500. The previous restriction preventing organisations with a NIC liability over £100,000 from claiming the allowance has also been removed.
Existing pressures in the free legal advice sector
Each year, we survey the agencies supported through our Centres of Excellence (COEx) programme, providing insight into challenges across the sector.
Our 2024 survey found that COEx agencies continue to navigate rising demand, financial instability, and recruitment challenges. Financial sustainability remains the top risk, with many relying heavily on short-term grants and uncertain funding. Over one in five reported cash flow difficulties and reserves below policy requirements.
Increasing demand and rising case complexity are adding to this financial pressure. Enquiries rose again in 2024, and clients are often presenting with multiple, interlinked issues that require longer engagement. Without corresponding funding increases, agencies are struggling to keep pace.
On top of this, the sector is facing a deepening workforce crisis. In recent years, the sector has struggled to recruit, retain, and develop its workforce. In 2024, staff turnover averaged 15%, driven by low pay, high stress, and limited career progression. Agencies report difficulties recruiting for specialist roles and rising levels of staff burnout. Recognising the scale of this challenge, the Advice Workforce Development Programme was launched in 2023 to explore sector-wide solutions.
How will NIC increases make matters worse?
The NIC increases add yet another layer of pressure to an already precarious situation. Advice agencies may now be forced to make tough decisions, such as reducing staff, cutting services, or even closing entirely. For staff, this could lead to heavier workloads, higher levels of stress, and no corresponding pay rises. For clients, it could mean reduced access to essential support and longer waiting times.
At our London Specialist Advice Forum meeting on 26 March, we discussed how the NIC changes are affecting agencies. Our CEO, Nezahat Cihan, noted that many agencies are tied to multi-year grants with no contingency for rising costs. With limited or no reserves, and growing demand, absorbing additional costs is a significant challenge.
Agencies expressed serious concerns, especially around staff wellbeing and retention. One reported that, due to the increased NIC burden, they had made the difficult decision not to offer pay rises this year – despite ongoing cost-of-living pressures on staff. Recruitment had already been challenging, and the NIC increases risk making it even harder to recruit and retain staff in key roles.
Another agency said that, while they were able to offer a 1.5% pay rise, staff felt this was insufficient in the face of the rising cost of living – effectively amounting to a real-terms pay cut. Trustees were exploring additional funding options and hoped to review pay later in the year.
A third agency explained that, although they had implemented a small cost-of-living increase in response to the staffing crisis, they did not believe that the changes to the Employment Allowance would make a meaningful difference to their budget – despite being a smaller organisation.
These concerns highlight how the NIC increases threaten to further destabilise the sector, leaving already underfunded and overstretched agencies with fewer options to meet rising need. Targeted action and support are urgently needed.
What can be done?
The importance of free legal advice cannot be overstated. These services help people understand their rights, navigate complex systems, and resolve issues related to housing, benefits, immigration, employment, and more. For many, they are the difference between stability and crisis.
Without increased funding and targeted support, vulnerable communities risk losing access to vital, timely help – allowing issues to spiral and become more complex and increasing pressure on public services like the NHS and local councils. Continued advocacy for free legal advice is crucial to ensuring agencies can keep supporting those who need them most.
To help mitigate the impact of the NIC increases – and to support longer-term sector sustainability – we encourage:
Advice agencies to:
- Speak with their funders. While funders are unlikely to be able to increase overall funding, some may allow flexibility in how existing funds are used, to help cover the additional costs of NIC increases – as noted by our CEO during the recent London Specialist Advice Forum meeting.
- Take steps to strengthen sustainability. As identified in our COEx Annual Review 2024, advice agencies should continue to explore new funding sources, invest in staff wellbeing and retention, and build stronger collaboration with other agencies to maximise resources, reduce costs, and strengthen advocacy efforts.
- Good starting points for collaboration include joining the London Specialist Advice Forum to connect with peers facing similar challenges and attending our upcoming Helping Hands: Valuing the Advice Workforce conference on 25 June, which will explore workforce challenges and solutions.
Funders to:
- Show flexibility. Allow agencies to adjust how they spend grant funding to help absorb NIC increases.
- Support sector resilience. To address the wider issues within the advice sector, as highlighted in our COEx Annual Review 2024, funders should increase multi-year core funding, invest in capacity-building (IT systems, finance, and staffing), and expand targeted funding for specialist advice services. These steps will help agencies absorb unexcepted, additional costs, like the NIC increases, while maintaining vital services.
The public to:
- Raise awareness of the importance of free legal advice.
We recognise that this is a particularly challenging time for advice agencies. LLST remains committed to supporting the free legal advice sector through our funding programmes and sector support initiatives. Sign up to our weekly newsletter to stay up to date with the support and opportunities we offer.