October has been a key month for Labour in fulfilling their plan to ‘Make Work Pay’.
On 10 October 2024 the Employment Rights Bill was introduced with improvements to workers’ rights and tackling fire and rehire practice. Yesterday, Rachel Reeves, Chancellor of the Exchequer, delivered the Budget. This was the first set of Budget announcements made by a Labour Government in over 14 years.
This blog looks at the headlines on how the Budget impacts employers, national insurance and minimum wage.
National minimum and living wage increases
- Legal minimum wage for over 21s will increase by 6.7% to £12.21 equivalent to £1,400.00 a year for an eligible full-time worker.
- The 6.7% increase to NLW is nearly four times September’s 1.7% inflation rate.
- 18–20-year-olds will see a 16.3% rise to £10 per hour.
- The new minimum pay rates will take effect from 1 April 2025.
Employer’s national insurance contributions rise
- From April 2025 employer’s NIC will rise from 13.8% to 15%
- The threshold at which employers start paying NIC has been reduced from £9,100 to £5000 per year from 6 April 2025 until 5 April 2028
- Employment allowance has been increased from £5,000 to £10,500 from 6 April 2025
- The threshold for employment allowance eligibility has been removed- this should relieve nearly 865,000 small businesses of NI costs next year.
Business rates
- Two permanent lower rates of business for retail, hospitality and leisure properties. In the short term, there will be a 40% relief for 2025/26 up to a cap of £110,000 per business.
Employee incentives
- There will be a package of reforms to the taxation of Employee Ownership Trusts (EOTs) and Employee Benefit Trusts.
Upcoming ‘Get Britain Working’ white paper
- Ahead of the Budget the Chancellor has unveiled a £240 million cash-injection to accelerate the rollout of local services to help people back into work and drive down inactivity.
- In a further bid to boost employment, the Chancellor promised an additional £1.8 billion to continue the expansion of government funded childcare support for working parents and a £115 million investment into Connect to Work- a new supported employment program matching people with disabilities or health conditions into vacancies.
The announcements may feel daunting for employers, especially those in retail and hospitality where NMW is widely paid. If you need assistance navigating the ever evolving legal landscape to reduce the risk of disputes and ensure fair treatment in the workplace, please do not hesitate to contact our employment law and HR specialists.
