News

In the first Labour budget for 14 years, the Chancellor, Rachel Reeves, announced sweeping measures to fill the alleged £22 billion black hole left by the previous government, as well as support public services. Here we look at how it will affect employers and what it means to recruitment in general.

Autumn Budget 2024

Entitled ‘Fixing the foundations to deliver change’ the budget claims to be the start of a decade of national renewal aimed at protecting people, fixing the NHS, and boosting investment to deliver growth and prosperity for all parts of the country.

Ms Reeves announced five major policy pillars:

A funding boost for the NHS - £22.6 billion will be invested in the NHS over the next two years to help patients access hospital appointments, upgrade GP facilities, establish new surgical hubs and offer more diagnostic scans.

Living standards – no increases to Income Tax, VAT, or employee National Insurance were announced. The National Living Wage (NLW) is set to rise to £12.21 per hour. Pensions are to be increased by 4.1%, and fuel duty remains frozen.

Investment in infrastructure - £100 million will go to rebuild schools and hospitals and fix roads. Local transport will also receive funding, and digital infrastructure will be boosted to allow more people to access high-speed broadband.

Economic and business growth – Business rates will be reduced by 40%, up to a cap of £110,000, and properties used for retail, leisure and hospitality will see reduced taxes. The small business multiplier is also being frozen, and Corporation Tax will remain at 25%.

Tax reform – tax loopholes are being closed and HMRC will be put on an efficiency drive. Any money saved will go directly to fund public services. New fiscal rules are also being devised to ensure that the government only borrows for investment and to reduce public debt over time.

What does the budget mean for employers?

If we drill down into the details of the budget we notice several things that will affect employers specifically:

Employer NIC – the rate at which employers pay National Insurance Contributions on behalf of their employees is set to rise by 1.2 percentage points to 15% and the threshold at which employers start to pay NI per employee is coming down from £9,100 per year to £5,000 per year. The increase is expected to raise around £25 billion per annum.

National Living Wage and National Minimum Wage – the NLW will increase by 6.7% from £11.44 per hour to £12.21 per hour for people over 21 years of age, equating to a rise of £1,400 per year for full-time workers. For people aged between 18-20 the NMW will also rise by 16.3% from £8.60 per hour to £10.00 per hour. Apprenticeship rates are also increasing, from £6.40 to £7.55 per hour.

Employment Allowance – to protect small businesses the government is increasing the Employment Allowance from £5,000 to £10,500. This is intended to reduce their NIC liability if the figure they pay is less than £100,000 for the previous tax year. Next year the government plans to abolish the £100,000 limit and expand the Employment Allowance to all eligible employers. They hope that this will mean that around 865,000 employers will pay no NIC next year and it may mean that four additional full-time workers earning the NLW can be employed without extra NI costs, and around a million companies will pay roughly the same as they did before the budget.

What effect will this have on employers and recruitment?

Some employers are concerned about the impact these measures will have on their business in terms of staffing costs and the amount they can invest in their business in the future but many have welcomed the protections that the government has offered them with the increase in the Employment Allowance.

The issue of training has also been raised, with some commentators making the point that skills investment will be impacted by higher staff costs, risking some businesses falling behind their competitors. Some experts have also warned that smaller businesses, which are less able to absorb the rise in costs, may have to lay people off or initiate hiring freezes. And it’s raised concerns that recruitment will be affected by a rise in the costs of salaries.

How can employers overcome these challenges?

Many employers, large or small, either in the public or private sector, will still be calculating the effect of October’s budget, to see exactly how it will impact their finances and workforce. Exactly how much individual businesses are affected by the changes Ms Reeves has instigated depends on a number of different factors such as how many people they employ and how many of their staff are paid at the NLW or NMW. But there are measures that employers can take to stay agile and cost-effective in this challenging economic environment.

Temporary staffing solutions, for example, can offer a flexible, efficient way to recruit the staff businesses need at the time they need them most.

Temporary staff are needed for both large and small organisations in the private and public sectors and can offer considerable cost-savings to employers, at a time when finances are tight. This kind of employment benefits employers by allowing them to cover seasonal requirements (such as the pre-Christmas rush), or short- or long-term absences. It enables businesses to unlock a wide pool of talent and bring in fresh ideas and skills. It also means that employees can bring in staff with particular skills that they are lacking, meaning that they can avoid costly and lengthy training. And it’s also a flexible solution to staffing issues, meaning that employers can scale up or down as needed.

It’s a fast and efficient method of recruitment too, meaning that employers can concentrate on their core business, leaving the selection and interview process to the agency involved. And, most importantly in the light of the chancellor’s budget measures, it leaves the recruitment agency to deal with payroll issues such as tax and NI.

If you’re worried about how the 2024 Autumn budget will affect your business and its associated staffing costs, talk to TaskMaster. We’ve been supplying flexible and responsive workforce solutions to businesses in the private and public sector for almost 30 years, and fill more than 2,000 temporary roles each year for a variety of clients in the driving, industrial, facilities management, catering and estates, commercial, utilities and waste sectors.

For more information about how we can help you grow your business through cost-effective temporary staffing solutions, contact us here.