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Methodology note

Add foreign-worker employer NI surcharge: calculation note

Assumptions behind the Add foreign-worker employer NI surcharge scenario. Implementation detail is incomplete, so uncertainty is explicit.

View main policy page: Add foreign-worker employer NI surcharge

Central fiscal result

-GBP 2.5bn - Net fiscal impact in 2027-28

Low case: -GBP 5.0bn. High case: +GBP 1.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Employer NI on foreign workers rises to 20%.
  • British workers remain on the standard employer NI rate.
  • Health, care and very small firms are exempt.
  • No replacement visa levy is modelled.

Affected population

  • Affected units are employers and foreign-worker employee jobs.
  • Exposure depends on payroll, nationality and exemptions.
  • Domestic workers may benefit if substitution is possible.
  • Consumers face higher costs in exposed sectors.

Gross impact

  • Reform claimed about GBP 4bn annual revenue.
  • Central case scores GBP 2.5bn after exemptions and behaviour.
  • High case allows receipts loss from reduced employment.
  • Output effects are shown separately, not fiscal-scored.

Fiscal build-up, central case

  • Additional employer NI receipts: -GBP 3.8bn
  • Lower PAYE and NI from reduced employment: +GBP 0.8bn
  • Administration and compliance: +GBP 0.3bn
  • Exemption leakage: +GBP 0.2bn

Central net impact: -GBP 2.5bn in 2027-28.

Behaviour and pass-through

  • Low case assumes high compliance and limited labour-supply response.
  • Central case assumes some hiring reduction and exemption planning.
  • High case assumes shortages reduce output and tax receipts.
  • Prices rise where employers pass on the surcharge.

Phasing

  • 2026-27: -GBP 0.5bn. Preparation or partial implementation.
  • 2027-28: -GBP 2.5bn. Main scenario year.
  • 2028-29: -GBP 2.0bn. Behaviour and pass-through develop.
  • 2029-30: -GBP 1.5bn. Steady-state uncertainty persists.

Main source groups

  • S1: Reform Contract defines the 20% rate and exemptions.
  • S2: HMRC NI ready-reckoners frame rate-change scale.
  • S3: UK immigration and tax-mobility studies inform wage and recruitment-risk assumptions.
  • S4: Current Reform page confirms stronger migration controls.
  • S5: No official payroll exposure table was found.