Autumn statement 2024: Employment costs set to increase

Labour’s first budget in 14 years and the first to be given by a female chancellor was much anticipated but revealed few surprises for employers.  Here we cover the key points of interest.

National Insurance Contributions increases

An increase in employer National Insurance Contributions (NICs) was much heralded in the media in the run up to the budget. The Chancellor has now provided the detail and confirmed that there will be a 1.2% increase to the employer rate, taking it to 15%.  There will also be lowering of the threshold at which employers start paying NICs on an employee’s wages from £9,100 to £5,000 per annum until 2028.  These changes will take effect from 6 April 2025 and will significantly increase employment costs for employers.

There is some better news for the employers currently claiming the Employment Allowance which gives eligible employers with NICs bills of £100,000 or less a discount of £5,000 on their NICs bill.  This discount will be increased to £10,500.  At the same time, the Employment Allowance will be expanded by removing the £100,000 eligibility threshold. Again these changes will take effect from 6 April 2025.

National Minimum Wage

Alongside the rise in employer NICs, an increase to the National Minimum Wage means that the National Living Wage (payable to those aged 21 and over) increasing to £12.21 per hour (a 6.7% increase).  As part of Labour’s manifesto commitment to remove the National Minimum Wage age bands so that everyone will eventually receive the same minimum wage, the increases for younger workers are significantly higher.  The rate for 18-20 year olds will rise by 16.3% to £10, with the rate for 16-17 year olds and apprentices increasing by 18% to £7.55.  These changes, which for the first time take the cost of living into account, will come into effect on 1 April 2025.   

Umbrella companies

The Chancellor announced that in order to tackle tax avoidance in the umbrella company market, the Government will make recruitment agencies responsible for accounting for PAYE on payments made to workers that are supplied via umbrella companies. Where there is no agency, this responsibility will fall to the end client business. This will take effect from April 2026 and the Government is publishing a policy paper which will provides further information on this measure.

Get Britain Working White Paper

The Chancellor also announced that a Get Britain Working White Paper will be published shorty.  This will set out a £240 million investment to trail new ways of getting people back into work, tackling the root causes of ill-health-related inactivity, supporting young people who are ‘not in education, employment, or training’ (NEET), and helping people to develop their careers.

For further information on how these changes could affect your business, please contact a member of our Employment team or submit an enquiry form, below.