The highly anticipated budget unveiled by Rachel Reeves on Wednesday introduced several significant measures set to impact employers moving forward. Coupled with the recent release of the Employment Rights Bill, 2024 has marked a year of considerable changes in employment law.
The key changes as a result of the Autumn Budget are as follows:
An increase in National Insurance for Employers
The news that Employer’s National Insurance contribution will increase to 15% from April 2025 is the most notable change. In addition to this, the threshold at which businesses start paying National Insurance on a workers' earnings will be lowered from £9,100 to £5,000. Whilst combined these measures will raise an additional £25 billion a year for the Treasury, this will have a significant impact on businesses and their bottom line.
An increase in Employment Allowance
The employment allowance enables eligible employers to lower their annual National Insurance liability, reducing the amount of Class 1 National Insurance paid each payroll run.
To mitigate the impact of increased National Insurance contributions on smaller businesses, the Chancellor announced an increase in the employment allowance from £5,000 to £10,500 and the removal of the £100,000 cap for all eligible employers, effective from 6 April 2025.
Consequently, businesses can hire up to four full-time workers at the National Living Wage without incurring National Insurance on their wages. This change means that 865,000 employers will not pay any National Insurance next year, and over one million will pay the same or less than before.
National Minimum Wage and Real Living Wage
From 1 April 2025, the National Living Wage for those aged 21 and over will rise by 6.7% to £12.21 per hour. Meanwhile, the National Minimum Wage for 18 to 20-year-olds will see a 16.3% increase, reaching £10.00 per hour. Additionally, the Real Living Wage, will increase to at least £12.60 per hour, with London rates rising to £13.85 per hour.
How will this affect employers?
The measures announced in this week's budget will have a considerable impact on expenditure for many businesses as, in addition to the cost of adapting to the changes brought in by the recent Employment Rights Bill, employers will also need to allow for increases in National Insurance payments and national minimum and real living wage increases.
About Tozers’ Employment Law Team
Tozers’ Employment Law Team is renowned for its comprehensive understanding of employment law. Serving both employers and senior professionals, the team offers guidance through all facets of employment relationships.
The team offers:
• Clear and Effective Advice: We provide straightforward answers in plain English, ensuring you understand all arrangements and their implications.
• Practical Solutions: Our goal is to achieve the best outcomes tailored to your needs.
• Prompt Response: We deliver timely advice when you need it most.
• Technical Expertise: We apply the law practically, even in complex situations.
Specialised Advice for Directors and Senior Managers:
• Contract Negotiation: Assistance with favourable employment terms, confidentiality clauses, and bonus schemes.
• Director Services: Negotiation of service agreements, departure packages, and advice on directors’ duties and liabilities.
• Dispute Resolution: Guidance on disciplinary issues, grievances, terminations, and redundancies.
Settlement Agreements:
We ensure employees receive independent legal advice on settlement agreements, helping you understand the terms and secure the best possible outcome.
How Tozers can help?
If you have any specific questions about the Employment Rights Bill or the latest changes as a result of the budget, please contact Tozers’ Employment Team. They will discuss your unique requirements and collaborate with you to find solutions.
