Tricks or treats: was the Autumn Budget 2024 spooky or superb for employers?

Rachel Reeves’ Autumn Budget came with jeers, cheers and the throwing of shade about private jet usage.

Amongst it all, there were some key takeaways relating to employment.  So, what are the three most important things for employers to know?

Overview

There have been some allowances but overall the budget will lead to additional costs for most employers, especially those who employ most staff on minimum wage and/or have a larger workforce.

Increases in minimum wages and employer NICs, along with potential costs and obligations arising out of recent legislation and the Employment Rights Bill, may understandably cause unease for employers.  Although labour has tried to soundbite ‘protections for working people’, critics suggest that in practice these measures could result in less generous employment benefits, fewer pay increases and even reduced recruitment and retention opportunities.

National Living and Minimum Wage (“NLW” / “NMW”)

What’s happening: from 1 April 2025, NLW for workers aged 21+ will increase to £12.21 per hour (from £11.44). NMW for workers aged 18 – 20 will increase to £10 per hour (from £8.60).

Impact: these are significant increases (6.7% and 16.3%, respectively, for those of you who like your numbers).  It’s also the first step of Labour’s commitment to move towards a single adult rate, closing the gap until there is a single rate for all workers aged 18+.

It’s not rocket science: increasing NLW/NMW benefits workers, and is critical for many in the world of increased costs of living. The flip side is that employers will need to shoulder the added costs (though its not wholly unexpected:as we’re used to NLW/NMW increasing by some amount each April).

National Insurance Contributions (“NICs”)

What’s happening: the government has delivered on its promise not to increase employee NICs. However, and in a way that some suggest is an example of splitting hairs, there will be a 1.2% rise in employer NICs.  From 6 April 2025, (a) employer NICs will increase from 13.8% to 15% and (b) the threshold at which employers start paying NICs on a worker’s earnings will reduce to £5,000 (from the current £9,100).

Impact: again, the impact on employers is obvious – higher staff costs.  To put it in context, Labour plans to raise an additional £25 billion a year through this measure. Although the government emphasised prioritising employees, there are concerns this could result in smaller wage increases as employers attempt to compensate for the additional costs.

Employment allowance

What’s happening: Employment allowance will increase from £5,000 to £10,500.

Impact: this will help some smaller businesses, as it aims to help firms by reducing their (otherwise increased) total National Insurance bill. Reeves said that businesses will be able to employ up to four full time workers on NLW without paying employer NICs. Notably though, although an increased allowance is always welcomed, it’s going to get eaten up very quickly by employers with larger and/or higher paid workforces.

How we can help

Employers need to get their heads around many changes including those in the Autumn budget, new sexual harassment laws and the Employment Rights Bill.  For assistance with any matters, including employer and management training needs, contact our employment team.