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Autumn Budget breakdown | Employment highlights for UK businesses
Written by Kirstie Smith on 13 November 2024
The recent Autumn Budget has delivered significant changes aimed at boosting public spending. However, the implications are likely to be profound for employers, particularly in sectors such as retail and hospitality, where the minimum wage is a common benchmark. Combined with upcoming employment law reforms in the recently announced Employment Rights Bill, businesses may face challenges ahead.
Here are four key headlines that stand to impact employers and the workplace.
1. Increased employer National Insurance contributions
Effective from April 2025, employers’ National Insurance contributions (NICs) will increase from 13.8% to 15%.
The government’s plans to increase employers’ NICs were widely reported, so this measure won’t have come as a surprise to most. However, there’s no getting away from the fact that this is a tough blow for many businesses.
On top of the percentage increase, the real impact on businesses is likely to come from the secondary threshold change. Currently, employers are only liable to pay NIC for staff earning more than £9,100 per year. From April, this will be reduced to £5,000.
This change means that employers will be liable for NIC for many more low-earning staff, estimated to equate to an additional £615 per employee in costs for employers.
There is some relief for smaller firms, in that the Employment Allowance will rise from £5,000 to £10,500. Also, the qualifying requirement for a business to have a total secondary Class 1 NIC liability of less than £100,000 in the prior year will be removed, making this relief in practice available to all eligible employers. The Chancellor stated in her speech that businesses should be able to employ four full-time workers on the National Living Wage without paying any NIC.
It’s also worthwhile noting that the Chancellor has extended NIC relief for hiring veterans until April 2026.
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2. Record-high National Minimum Wage / National Living Wage rises
The National Living Wage (NMW), payable to all staff aged 21 years or over, is set to rise to £12.21 per hour. This represents a 6.7% increase from the current rate of £11.44.
Younger workers and apprentices will see an even greater boost in their wages:
- Workers aged 18 to 20 will see their hourly rate increase from £8.60 to £10.00 (+16.3%).
- For those aged 16 to 17 and apprentices, hourly rates will move from £6.40 to £7.55 (+18%).
These increases are the largest on record, aligning with the government’s commitment to establishing a single adult rate.
3. Adjustments to Carer's Allowance
The income threshold for Carer’s Allowance is set to rise, allowing carers to earn more while retaining their allowance. From next April, carers can earn up to £196 weekly, an increase from the current limit of £151, before losing their allowance.
While this change won’t result in any additional costs to employers, it’s important to be aware of it, particularly if you have any employees who have historically been unable to work overtime shifts due to the impact on their carer’s allowance eligibility.
4. VAT on private school fees
For private schools, the Budget also confirmed promises made in the Labour manifesto to impose VAT on fees from 1 January 2025, as well as to remove private schools’ ability to claim charitable rate relief from business rates from April 2025. The latter is subject to the parliamentary process.
Preparing for change
As a result of these changes, many employers will face tough decisions as to how these costs will be met – whether by absorbing them or passing them on to customers or employees. Many commentators have already expressed concerns that these increases will have an indirect effect on employees, whether that be a freeze on salary increases or, in worst-case scenarios, job losses.
Most of these changes will take effect in April, so employers have time to assess the impact of these changes, and what, if any, plans need to be implemented.
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Concerned that the measures discussed above will require changes that impact your employees? Contact WorkNest’s Employment Law and HR experts on 0345 226 8393 or request your free consultation using the button below.
