The UK government has introduced the Employment Rights Bill to promote fairness in the workplace. This legislation seeks to enhance workers’ rights by addressing pay, job security, and flexible working conditions. As part of the Labor Department’s “Plan to Make Work Pay,” the bill could lead to substantial changes in payroll management, requiring businesses to adapt to new regulations. Before becoming law, the bill must pass through both chambers of Parliament, potentially undergoing revisions along the way.
The Chartered Institute of Personnel and Development (CIPD) has described these proposed changes as the most significant shift in employment law in decades and has expressed strong support for the bill’s objectives.
In tandem, the UK Autumn Budget 2024 introduces key updates that will impact payroll processing, HR management, and training expenses. Business owners are encouraged to assess how these changes will influence their daily operations, financial planning, and workforce management.
Highlights of the Employment Rights Bill:
● Eliminating Exploitative Zero-Hours Contracts
Workers will gain fair contracts with guaranteed hours.
● Ending Fire and Rehire Practices
Protects employees from being unfairly dismissed and rehired on less favorable terms.
● Basic Employment Rights from Day One
Offers immediate protections against unfair dismissal and access to parental leave and paternity benefits.
● Statutory Probation Period
Introduces a standardized probation period for new hires, with the government favoring a nine-month duration.
● Enhanced Statutory Sick Pay
Removes the lower earnings limit and abolishes the waiting period for sick pay eligibility.
● Creation of a Fair Work Agency
Ensures compliance with holiday pay regulations and provides employer support to adhere to the law.
This legislation aims to modernize outdated employment laws, driving improvements in pay, productivity, and workplace fairness. It marks the most substantial advancement in workers’ rights in a generation and represents a significant step toward making work more equitable and rewarding.
What This Means for Employees.
● Immediate Basic Rights.
Employees will enjoy greater job security and fair treatment from the very start of their employment.
● Elimination of Unfair Practices.
The bill puts an end to exploitative contracts and unjust dismissals, ensuring fairer working conditions.
● A More Equitable and Flexible Workplace.
It encourages gender equality and establishes flexible work arrangements as a standard where practical.
● Enhanced Support During Life’s Challenges.
Stronger protections are introduced for pregnant workers, new mothers, and individuals navigating menopause.
These changes aim to create workplaces that are more inclusive and adaptable. With the establishment of the Fair Work Agency to enforce rights such as holiday pay, businesses can benefit from reduced hiring costs and higher employee retention. These measures not only enhance workplace fairness but also stimulate economic growth.
1. Employer National Insurance Contributions (NIC) Increase.
One of the most significant updates in the Autumn Budget 2024 is the rise in Employer National Insurance Contributions (NIC). From April 2025, the NIC rate for employers will increase from 13.8% to 15%. Additionally, the threshold at which employers begin paying NIC will drop from £9,100 to £5,000, meaning more employees will now qualify for contributions. As a result, many businesses will face higher payroll costs.
● Impact on Your Business.
● If your employees earn over £5,000 annually, this change will directly affect your payroll budget. Here’s an example of how this increase could impact a company with 10 employees earning £25,000 each:
● Current NIC Costs:
For an employee earning £25,000:
NIC = (£25,000 − £9,100) × 13.8% = £2,194.
Total NIC for 10 employees = £21,940 per year.
● NIC Costs from April 2025:
For an employee earning £25,000:
NIC = (£25,000 − £5,000) × 15% = £3,000.
Total NIC for 10 employees = £30,000 per year.
● Increase in NIC Costs:
Total annual increase = £30,000 − £21,940 = £8,060.
This equates to an additional £671.67 per month.
This substantial rise highlights the importance of revisiting your payroll budget to account for the additional costs. By planning ahead and adjusting your financial strategies, you can minimize the impact of these changes and ensure a smoother transition in 2025.
2. Increased Employment Allowance.
To address the upcoming rise in National Insurance Contributions (NIC), the Employment Allowance will double from £5,000 to £10,500 starting in April 2025. This allowance provides NIC relief for smaller businesses, and importantly, the current £100,000 cap on eligibility will be removed. This change means a larger number of businesses will qualify for the relief.
Benefits for Your Business
Using the same example of a company with 10 employees earning £25,000 each, here’s how the enhanced Employment Allowance can reduce your NIC costs:
NIC Bill Without Allowance: £21,940
NIC Bill with Current £5,000 Allowance: £16,940
NIC Bill with New £10,500 Allowance: £11,440
Savings from Increased Allowance: £16,940 − £11,440 = £5,500
This significant increase in the Employment Allowance offers much-needed financial relief, potentially saving businesses thousands of pounds. The savings can be reinvested into operations, staff development, or other areas to offset the rising NIC costs. For small businesses, in particular, this change provides greater flexibility in financial planning and budget management.
3. Growth and Skills Levy: A Flexible Training Solution.
The newly introduced Growth and Skills Levy replaces the previous apprenticeship levy, offering businesses greater flexibility to address skill gaps and train seasonal staff. This initiative enables companies to fund short-term, skill-specific training programs tailored to their immediate needs.
How It Works.
For instance, if you own a retail business preparing for the holiday rush, the Growth and Skills Levy can finance targeted training for seasonal staff. This allows your business to adapt to changing demands without committing to long-term training initiatives.
What Businesses Should Do?
Identify Key Skill Gaps: Pinpoint areas where short-term training can have the greatest impact, such as customer service, compliance, or sales. This ensures your team is equipped to handle peak periods effectively.
Collaborate with Training Providers: Partner with reputable training organizations ready to deliver programs aligned with the new levy. High-quality, focused training will prepare employees while streamlining payroll processes.
This approach not only meets immediate training needs but also fosters a culture of learning and growth, boosting employee development and retention.
4. Mandatory Digital Reporting for Benefits in Kind (BIKs)
Starting in April 2025, businesses will be required to report Benefits in Kind (BIKs), such as company cars, private healthcare, and gym memberships—digitally through payroll software. This update aims to improve tax collection accuracy and simplify compliance with regulations.
Preparing for the Change
If your business currently manages BIKs manually, now is the time to upgrade to payroll software that supports digital reporting. By deducting benefits directly from paychecks, employees can spread out their tax payments over the year, avoiding large end-of-year tax bills.
Practical Steps
Upgrade Payroll Software: Ensure your payroll system supports digital BIK reporting. If it doesn’t, consider upgrading to modern software that integrates seamlessly with your current systems.
Simplify Benefits: Streamlining complex benefits ensures better compliance with UK regulations and makes administration more straightforward. Clearer benefits management reduces administrative burdens and enhances employee understanding.
The shift to digital reporting reduces administrative costs and increases transparency, benefiting both employers and employees alike.
5. Additional Budget Updates
The Autumn Budget 2024 also includes other significant changes:
●National Minimum and Living Wage Increases:
●National Living Wage for workers aged 21 and older will rise by 6.7%, from £11.44 to £12.21 per hour.
●National Minimum Wage for those aged 18-20 will increase from £8.60 to £10 per hour.
●Apprentice Wage will jump from £6.40 to £7.55 per hour.
●Carer’s Allowance Increase:
The Carer’s Allowance will align with 16 hours at the National Living Wage, enabling working carers to earn over £10,000 annually while continuing to receive the allowance.
●Capital Gains Tax Changes:
Adjustments to capital gains tax are also on the horizon, potentially affecting individuals and businesses with taxable asset sales.
These updates reflect a broad effort to improve worker support, streamline payroll compliance, and provide financial relief where needed. Businesses should review these changes and adjust their budgets and operations accordingly.
Conclusion.
Transformative changes for payroll and employment law in the UK indicated by the Employment Rights Bill and Autumn Budget 2024 Aimed at enhancing workers’ rights, these initiatives are set to significantly influence payroll management practices across the country.
Key measures include the implementation of mandatory digital reporting for Benefits in Kind (BIKs) and increase in Employer National Insurance Contributions (NIC). While these updates present challenges, they also offer opportunities for businesses to optimize and refine their operations.
To adapt effectively, businesses must remain informed and take a proactive stance in updating their strategies. By doing so, they can ensure compliance with the new regulations while maintaining operational efficiency.
