In-depth: The Autumn Budget 2024 – what this means for employers
Wednesday 27th November 2024
On 30 October 2024, the Chancellor of the Exchequer delivered the 2024 Budget. Not only was this significant as it is the Labour Government’s first Budget since coming into office; it was also delivered by the UK’s first female Chancellor, Rachel Reeves.
In the Budget, the Government pledged to raise over £40bn of revenue for public spending initiatives. Here are some key points on the impact this will have on employers.
What does this mean for Employers?
- Increase to the national minimum wage rates
From 1 April 2025, the national minimum wage rates will increase:
- For 18 to 20-year olds, to £10.00 an hour (an increase of 3% and the largest ever increase);
- For those aged 21-years old and above, the national living wage will increase from £11.44 to £12.21 a hour (an increase of 7%).
These measures are set to impact over 3 million UK workers and the Government have taken into consideration the cost of living, for the first time, when calculating the uplift.
The increase in wages moves the Government one step closer towards their long-term plan as stated in the Employment Rights Bill of moving to a single adult rate, which will not be tapered depending on age. This move seeks to align the two current figures more closely.
- National Insurance Contributions (NICs) increased
From April 2025, National Insurance Contributions (NICs) from employers will increase by 1.2%, rising from 13.8% to 15%.
Employers will also make NICs at an earlier stage, as the threshold to start paying national insurance on their employee’s earnings will be reduced from £9,100 to £5,000. This increase is expected to generate an additional £25bn by the end of the Budget’s forecast period. Current estimates state that it will increase the costs to an employer by around £900 per employee, based on median average earnings.
However, there is a carve out to support smaller businesses. Their national insurance liability will be reduced, so they will only be required to pay from £10,5000 onwards, as opposed to the current threshold of £5,000. This is expected to impact around 865,000 small businesses.
Whilst employers are to bear the cost of the increase in NICs, this could subsequently impact employee’s salaries and/or company benefits as businesses may need to reallocate funds to cover the increase in contributions. However, an employee’s earnings must not be allowed to fall below the applicable national minimum wage rate in light of this.
From an employee perspective, there is a current freeze on income tax and NICs thresholds until April 2028. This Budget did not extend this current freeze. From April 2029, these personal tax thresholds will be uplifted in line with inflation.
- Get Britain Working
The Government has introduced the ‘Get Britain Working’ package worth £240 million, which is designed to break down barriers to work and tackle the 2.8 million people who are out of work due to long-term sickness.
This is something employers should consider in the near future, as this initiative seeks to charge them for increased support and adjustments to broaden their workforce and encourage people into employment.
- Employment Rights Bill
With the introduction of provisions made under the Employment Rights Bill that seek to improve job security and extend employee protection, employers are expected to incur increased expenses related to these. Possible areas where employers can expect an increase in expenses include enhanced redundancy protections and flexible working arrangements.
For more information on the Employment Rights Bill, please see our detailed analysis on the Employment Law Changes Briefing.
Comment
Overall, the Budget announcement does not come as too much of surprise given what was set out in the Employment Rights Bill published on 10 October 2024. Suggested changes set out in the Bill, such as the levelling of the national living wage into one single adult rate, is reflected in this year’s Budget. The Government’s consideration of the cost of living crisis being reflected in the minimum wage uplift demonstrates how turbulent the economy has become in recent years.
Employers should take steps to review how these increased costs will impact them by conducting a financial assessment, reviewing budgets and seeking professional advice to prepare for the above changes being implemented from April 2025.
