On October 30, 2024, the Labor government released its first budget since coming to power. And as expected, employers are expected to adopt many changes; In this blog we outline the key points that will impact businesses.

Any changes in legislation are confusing and often complicated, which can cause anxiety among human resources professionals and small business owners. In an effort to demystify the budget and ease some of your concerns, we’ve broken it down.

Some important changes we will look at include increases to the National Minimum Wage and National Insurance. While these changes seem scary, the blow will be softened for some employers with an increase in the employment allowance available to small businesses.

Any changes in legislation are confusing and often complicated, which can cause anxiety among human resources professionals and small business owners. In an effort to demystify the budget and ease some of your concerns, we’ve broken it down.

Keep reading for a concise overview of the 2024 fall budget.

National minimum wage and national insurance contributions to increase

Alongside the budgetary provisions, the The government has announced annual increases in the national minimum wage. This will come into force on April 1, 2025, so you still have time to prepare. The new minimum wage requirements are:

• 21 years and over – the minimum wage will increase from £11.44 to £12.21 per hour
• 18 to 20 – the minimum wage will increase from £8.60 to £10 an hour
• 16 to 17 years old and apprentices – the minimum wage will increase from £6.40 to £7.55 per hour

These increases bring the rates for under-21s and over-21s closer together and are a step towards the government’s plans to introduce a single rate for all adult workers.

Housing compensation (the amount of accommodation provided by an employer that can be taken into account when calculating the minimum wage) will also increase from £9.99 to £10.66 per day.

The government also announced that there would be a 1.2% increase in national insurance paid by employers. This means that it will increase from 13.8% to 15% on April 1, 2025.

The threshold at which employers start paying National Insurance on a worker’s earnings will also rise from £9,100 to £5,000 a year.

Employment allowance will increase

To soften the blow from rising national insurance contributions, the government announced that the employment allowance for small businesses will be increased from £5,000 to £10,500. The allowance allows employers to reduce their Social Security contributions up to the amount of the allowance, over the financial year.

The Chancellor explained that this would mean 865,000 employers would pay no national insurance next year (because the £10,500 allowance applied to their national insurance obligations would reduce their contributions to zero), while more than one million would pay the same amount or less. than they did before.

End of freezing of personal tax thresholds

The government has announced that there will be no extension of the current freeze on income tax and national insurance thresholds, and that the relevant thresholds will increase in line with inflation from financial year 2028-2029.

Retirements

Pensions will also be affected by the autumn budget. Basic and new state pensions will be increased by 4.1% in the 2025-26 financial year, in line with income growth.

Increase in carers’ allowance

The Chancellor also announced there would be an increase in the amount carers can earn while receiving the Government’s £81.90-a-week Carer’s Allowance.

This increase will mean that a carer will be able to work the equivalent of 16 hours per week at the National Living Wage and will therefore be able to earn more than £10,000 per year and still be eligible for the benefit. This is good news for employees with family responsibilities, but also for employers, because it gives caregivers more incentive to keep their jobs.

Do you want to stay informed about legal requirements?

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The Government is introducing its new Employment Rights Bill to Parliament today, which will implement the plans it outlined in its ‘Make Work Pay’ pre-election platform.

The Employment Rights Bill will still be subject to parliamentary approval. It is therefore not yet clear when the provisions will come into force and we will provide further guidance on exactly how the changes will apply over the coming days and weeks.

Perhaps the most important changes for SMEs are:

• A ban on zero-hours contracts and “firing and rehiring” practices
• Introduce unfair dismissal rights from the first day of employment
• Make flexible working the default position for all employees
• Remove a lower minimum wage for young workers
• Make statutory sick pay available from the first day of absence

Below we present more details on these changes and other measures affecting SMEs:

Ban certain zero-hours contracts

Workers on zero-hours contracts will now be entitled to a guaranteed number of working hours if they work normal hours over a defined period, although they will be able to choose to remain on zero-hours contracts if they wish. . This new right may prove difficult in sectors where employers need to hire workers on a flexible basis, such as hospitality and retail.

A ban on “firing and rehiring” practices

Employers will not be able to fire an employee and rehire them on less favorable terms. Such practices are typically only used by employers as a last resort when there is an urgent need to cut costs to keep their business afloat and will therefore reduce the options available to businesses when the going gets tough.

Make unfair dismissal from day one correct

Currently, employees can only bring a claim for unfair dismissal after two years of employment (subject to very limited exceptions), giving employers a reasonable amount of time to decide whether a new hire is a good fit for the organization and, if not, to let them go without fear of reprisal. Making unfair dismissal possible from day one will mean that employers will have to follow much more onerous procedures before dismissing an employee in the first days of their employment, although the Government is still consulting on the introduction of a period of dismissal. It would be relatively simple to let unfit employees go if they do not perform well during this (limited) period.

Make flexible working the default position

While currently an employee must make a request for flexible working which an employer can only refuse on reasonable grounds, the new legislation will make flexible working a default right, unless an employer can demonstrate that this is not feasible in the workplace. While this means employers can avoid measures such as flexible hours and remote working where this is not possible in their business, the onus will now fall on businesses to justify their stance.

Have the same minimum wage for all workers

Currently, it is possible to pay young workers a lower wage than adults, which encourages many employers to hire young workers and give them a first chance. In the future, employers will need to prepare for all staff to be entitled to the same minimum wage, even those who are not adults, and that this amount is likely to increase to take into account the cost of living.

Increasing the availability of statutory sick pay

Currently, employees must earn a minimum amount before being eligible for statutory sick pay and the entitlement only arises when an employee reaches their fourth day of absence. Reducing the salary cap and removing the waiting period will mean that employers will have to budget for increased salary costs when employees are absent.

Give employees the right to bereavement leave, paternity leave and parental leave from the first day of employment

Employers will need to prepare for the new rules around taking these types of leave and be prepared for the fact that no minimum period of service is required before employees can access the leave.

Strengthening protections against dismissal for pregnant women

While no one would object to pregnant women and those returning from maternity leave not being unfairly discriminated against, sometimes downsizing is necessary, particularly when a business is going through tough times. The new measures risk making this process more expensive when it comes to pregnant employees or those who have just taken maternity leave.

Creation of a new fair labor agency to uphold employee rights

This means that employers will need to exercise caution more than ever to ensure they comply with all their obligations under employment law. At Employment Hero, we are committed to supporting SMEs on this journey every step of the way.

While the above measures undoubtedly represent the biggest change in employment law in decades, the government plans to go even further and is also today publishing a Next Steps document which sets out its plans for the reforms future.

Subject to consultation, this includes:

• A right to stop, preventing employees from being contacted outside of opening hours, except in exceptional circumstances
• Make it mandatory for large employers to declare their ethnicity and disability pay gap
• End the current two-tier system of “workers” and “employees” and introduce a single category
• Review current entitlements to parental leave and carers’ leave

Need additional help?

We get it, keeping up to date with labor law is difficult and takes time. So if you need further help understanding your current or future employment law obligations, our human resources advisory service is here to help. Our HR Advisory service gives you unlimited access to a team of HR experts available to guide you through the maze of rules and regulations.

Let Employment Hero take the anxiety out of staying up to date with the law, so you can focus on what really matters: your people. To find out more, speak to a member of our team today.