UK Autumn Budget 2024 & Employment Rights Bill: Key Changes for Employers

National Insurance and Minimum Wage Changes 

As 2025 approaches, UK employers should prepare for a series of regulatory and budgetary changes that will impact their responsibilities and payroll costs. Below are the most important updates from the Autumn Budget and the upcoming Employment Rights Bill that employers need to know. 

Key Budget Changes for Employers

Employer National Insurance (NI) Contributions Increase

• Effective Date: 1 April 2025
• How It Impacts Employers: Employer NI contributions will rise by 1.2 percentage points, increasing from 13.8% to 15%. Employers should anticipate higher payroll costs starting April 2025.

Lowered NI Threshold for Employers

• Effective Date: 1 April 2025
• How It Impacts Employers: The threshold at which employers start paying NI will drop from £9,100 to £5,000. This change will lead to NI payments on a larger portion of payroll, raising costs, especially for lower-wage positions.

Minimum Wage Increases

• Effective Date: 1 April 2025
• For Ages 21+: The minimum wage will increase by 6.7%, reaching £12.21 per hour. Employers must ensure wage compliance across all age groups and consider the implications on wage budgets.
• For Ages 18-20: Minimum wage will rise by 16.3%, bringing it to £10 per hour. Employers will need to update pay scales and budget for these increases.

Future Tax Threshold Adjustments

• Effective Date: 2028
• How It Impacts Employers: The freeze on tax thresholds will end, with bands increasing annually in line with inflation. Employers should ensure payroll systems can accommodate these adjustments, which could impact income tax deductions.

Additional Budget Tax Measures for Businesses

The Autumn Budget also introduced tax incentives designed to stimulate investment and growth in certain business areas, which may benefit employers looking to expand or modernize.

Full Expensing Relief Extended

• Effective Until: 2026
• How It Impacts Employers: Businesses investing in qualifying plant and machinery can offset 100% of investment costs against taxable income. Employers considering facility upgrades or technology investments can benefit from this immediate tax relief.

Enhanced Research and Development (R&D) Credits

• How It Impacts Employers: New reforms allow businesses that engage in R&D, particularly in technology and manufacturing sectors, to claim higher tax reliefs. Small and medium-sized enterprises are eligible for additional credits when they are intensive R&D spenders.

Corporate Tax Surcharge Adjustments for Banks

• How It Impacts Employers: For banks, the surcharge on profits above £100 million has been increased to account for changes in the corporate tax rate, which could impact financial employers directly.

Employers in these sectors or those considering capital investments can leverage these tax reliefs to offset potential payroll cost increases in 2025.

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Upcoming Employment Law Reforms 

The UK Employment Rights Bill, as introduced to Parliament, proposes significant changes affecting employee protections, flexible work arrangements, and dismissal rights. Here’s what employers should prepare for:

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Key Employment Rights Bill Provisions

Statutory Sick Pay (SSP) Reforms

• Effective Date: Expected Early 2025

• How It Impacts Employers: The current three-day waiting period for SSP will be removed, making SSP payable from Day 1. Additionally, the Lower Earnings Limit (LEL) for SSP qualification will be removed, and the government will review the appropriate SSP rate for low earners.

Unfair Dismissal Rights

• How It Impacts Employers: Employees will gain the right to claim unfair dismissal from Day 1, though a proposed 9-month probationary period would allow for simplified termination of employment without a full process. Employers should monitor further guidance on probationary period rules.

Flexible Working Rights

• How It Impacts Employers: Employees will have the right to request flexible working arrangements from Day 1. Employers can still refuse requests if statutory grounds for refusal are provided, ensuring that each request is fully considered.

Guaranteed Contracts for Regular Hours

• How It Impacts Employers: Workers with regular hours over a 12-week period can request a guaranteed contract. For those who prefer to retain zero-hour arrangements, there will still be an option to opt out.

Automatic Unfair Dismissal for "Fire and Rehire"

• How It Impacts Employers: Termination and re-engagement, or "fire and rehire," will be considered automatic unfair dismissal. The only exception is in financial situations where the business’s viability is at risk.

Collective Redundancy Consultations

• How It Impacts Employers: Employers will be required to conduct collective consultations for redundancies affecting 20 or more employees.
• Strengthened Protections for New Parents and Pregnant Employees
• How It Impacts Employers: Employees returning from family leave will be protected against dismissal for six months after their return.

Third-Party Harassment Protections

• How It Impacts Employers: Updates to the Equality Act 2010 will establish express protections against third-party harassment and strengthen employers’ duty to prevent sexual harassment.

Gender Pay Gap and Menopause Support Action Plans

• How It Impacts Employers: Large employers (250+ employees) will be required to publish gender pay gap action plans and provide support for employees through menopause.

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5 Steps To Prepare for The Changes As An Employer

Employers should begin assessing the financial impact of these updates on payroll, benefits, and operational policies. To stay compliant, adjustments to payroll systems, employment policies, and potentially even hiring budgets may be necessary. By adapting promptly and staying informed on shifting regulations, employers can stay ahead of the curve.

Here’s how to get started:

1. Adjust Your Budget 

Plan for increased payroll costs due to NI and minimum wage changes and review any potential tax incentives that may help offset costs, such as R&D credits or full expensing.

2. Make Updated To Employment Policies 

Ensure employment policies reflect new flexible working rights, guaranteed-hour contracts, and dismissal protections. Update your onboarding process to clarify probation terms and new rights from Day 1.

3. Review and Strengthen Harassment Policies

Strengthen policies against workplace harassment, with clear measures in place to prevent third-party harassment and ensure compliance with the Equality Act amendments.

4. Have An Action Plan For Gender Pay Gap Reporting 

For large employers, begin gathering data and establishing action plans to meet gender pay gap reporting requirements and support for menopausal employees.

5. Update Your Payroll Processes 

Update sick leave policies and payroll processes to accommodate SSP from Day 1 and prepare for changes to the Lower Earnings Limit in SSP calculations.

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Stay Compliant With UK Employment Regulations

By proactively addressing these changes, employers can minimize disruptions, avoid any penalties and stay in line with the UK’s evolving employment landscape.    

It doesn't have to be complicated to stay compliant. Playroll's on-the-ground employment experts can do the heavy-lifting to ensure compliance with shifting employment regulations, and inform you how these policies impact your organizations. Book a time with a UK employment consultant to learn how we can support your business.