New legislation and a tight budget - is your business ready?
A new Government, reformed employment legislation and a very tight budget set’s the foundation for businesses as we draw closer to 2025. With many changes on the horizon, this is a daunting time for employers who are currently navigating the proverbial spanners in the works. However, change can become opportunity with the right strategic approach and proactive planning. The principles of the first Labour budget in almost 15 years were outlined by Rachel Reeves as Economic Stability and Growth. With expected changes to employee rights in 2025, this budget further signals the new Government's intention to protect workers.
We’re not going to recap the entire lengthy Autumn budget and Employment Rights Bill Proposal, but we have identified some key changes that impact recruitment, alongside suitable solutions.
So, What’s Changing?
NI Increase for Employers | A tax on jobs?The most concerning element of last week's budget for employers will be the 1.2% increase in employers' national insurance to 15% in April 2025. Although lower than the 2% increase anticipated in the lead up to the budget, it is still a significant increase for a high percentage of UK Employers, especially when coupled with the reduction in the secondary national insurance threshold. Rachel Reeves announced that the threshold at which employers begin to pay national insurance on an employee's salary will fall from £9,100 per annum to £5,000. There is some good news however! Smaller business will be protected by an increase in the employment allowance from £5,000 per year to £10,500. It is estimated that 865,000 employers won’t pay any National Insurance at all next year and over one million will pay the same or less as they did previously. Employers located in UK Investment Zones, or 'Special Tax Sites' won't pay NI for 36 months on each new starter, up to a limit of £25,000 per year. This is an extension of the policy currently applied to Freeport Tax sites. These measures are expected to raise a huge £25bn in taxes. The messages are a little mixed for employers, but the predicted impact is a fall in employer hiring intention. Business who are planning to hire will need to review their budgets and consult on hiring strategies for the upcoming years. | |
| National Minimum Wages rising by 6.7%The chancellor announced that the national minimum wage will increase by 6.7% in April 2025 to £12.21. This is higher than the Low Pay Commission recommendation of £12.10. The pay rise will benefit over 3 million of the lowest paid workers across the UK, with full time workers receiving an extra £1400 per year. A steeper increase for those aged between 18-20 marks the first step in abolishing the age banding for NMW rates as Labour move towards a single adult rate. Apprenticeships: Increasing from £6.40 per hour to £7.55
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Business RatesEmployers in the hospitality, leisure, and retail sectors will have their 75% business rates discount, which is due to expire in April 2025, replaced by a 40% relief in 2024/25. We can expect to see two new lower rates introduced in 2026/27. Although the extension will be encouraging for employers in these sectors it still means that many businesses will see their business rates nearly double (rather than quadruple!). | |
With Labour pledging not to increase tax for 'working people', there was only one place to turn to fill the £20bn fiscal black hole, with business' footing the bill. We do not expect another fiscal update until next Autumn, and employers face a tough year ahead with significant financial headwinds.
What Can Employers Do?
For business who are looking to grow and had budgeted to hire in 2024/25 the reactive approach to these changes may be to pause all hiring, strengthen in-house teams, and increase workload to meet business demands. Adversely, this short-term fix could result in lower employee engagement, higher turnover, and decreased performance – all having a far more detrimental impact on your business in the long term.
A difficult position for business leaders, and if commitment to hiring is your main concern, we suggest something a little different…
Temporary StaffingUtilise a flexible temporary workforce, reduce cost paying for workers when you need them. 24/7 support, with a single point of contact who feels like part of your team. | Temp to PermTrial your new hire on a 12-week temporary basis first. Reducing the risks (and the paperwork) during the first few months to ensure you find the right team fit. |
If you are looking to hire permanently but concerned about the risks and costs of getting it wrong, we’ve got that covered too.
Head over to our last blog to learn more about strategic hiring, specialist recruitment and workforce planning:
New Legislation and a Tight Budget.
We’re ready. Are you?
If you did want a much longer read, and some additional information, check out our sources below:
A full report on the Autumn 2024 budget can be found here
Further insight and guidance around employment legislation changes can be found here