Employment Law & HR: Key Changes from the Autumn Budget 2024
On 30 October 2024, Chancellor of the Exchequer Rachel Reeves presented the highly anticipated Autumn Budget, unveiling a series of significant measures poised to reshape the UK’s employment landscape. Among the key announcements was the widely expected increase in employers’ National Insurance contributions (NICs), alongside planned rises in the National Living Wage (NLW) and the National Minimum Wage (NMW) scheduled to take effect in April 2025.
Rise in the National Minimum Wage (NMW) and National Living Wage (NLW)
As of 1 April 2025, new wage rates will be introduced, based on recommendations from the Low Pay Commission (LPC). These adjustments reflect the government’s commitment to fair wages and a higher standard of living for workers, in response to the increased cost of living, especially as inflation trends continue to evolve.
| Age | Current | New Wage Rates – starting on 1 April 2025 | Increased |
| 21 and over | £11.44 | £12.21 | 6.7% |
| 18 – 20 | £8.60 | 10.00 | 16.3% |
| 16 – 17 | £6.40 | £7.55 | 18% |
| Apprentice | £6.40 | £7.55 | 18% |
| Daily accommodation offset | £9.99 | £10.66 | |
| Weekly accommodation offset | £69.93 | £74.62 |
What is NMW?
Younger employees – aged between 16 and 20 – receive the National Minimum Wage.
The National Minimum Wages Act includes an implied term in every employment contract stating that employees must be paid at least the NMW, regardless of whether they work full-time or part-time. Additionally, it does not matter if the individual has a second job or other sources of income; the employer is still required to pay them at least the NMW for the work they perform under the implied term mentioned.
The elements of pay that contribute to the NMW include:
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- Gross basic salary or wages (before any deductions for PAYE, national insurance, or employee pension contributions)
- Bonuses
- Commissions
- Performance-related incentive payments
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It’s important to note that overtime or shift work premiums are not included in the calculations.
What is the NLW?
The National Living Wage (NLW) is currently the statutory minimum for workers aged 21 and over.
Why the increases?
Aligning Wages with the Cost of Living: The increase to £12.21 for workers aged 21 and over marks a significant step towards ensuring that wages keep pace with inflation and the rising cost of living. The NLW aims to provide a standard of living that enables workers to meet basic needs.
Structured wage growth for young worker: For younger workers, the new rates of £10.00 for those aged 18-20 and £7.55 for 16-17-year-olds, reflect a thoughtful and structured approach to youth employment. While still providing fair compensation, these rates encourage younger workers to enter the job market, gain valuable experience, and build a strong foundation for their future careers.
Supporting apprentices: The apprentice rate remains at £7.55, which is crucial for encouraging young individuals to engage in vocational training while ensuring they receive financial support during their learning period.
Addressing Housing Costs with the Accommodation offset: The accommodation offset rate, allowing wage deductions for employer-provided housing, has been adjusted to better reflect rising housing costs. This change ensures deductions remain fair and balanced, supporting both employees and sectors where housing is integral to employment.
Economic Context: Inflation and Cost of Living
The LPC’s recommendations are particularly timely, considering the current economic landscape. Inflation rates have fluctuated significantly over the past years, with recent trends indicating a gradual decrease after a peak in late 2022. The LPC has factored in projected inflation trends up to March 2026, which is essential for setting sustainable wage levels.
Inflation Rates: The Consumer Price Index (CPI) is expected to stabilise at around 3-4% by early 2025, influencing the decision to raise wage levels.
Impact on workers: Rising wages aim to offset such living costs, such as housing and transportation, which have become increasingly burdensome, especially in urban area.
Implications for Employers
Budget Adjustments: Prepare for increased payroll expenses and consider revising your pricing strategies.
Employee Retention: Offering competitive wages may improve staff retention and attract new talent, particularly in sectors facing labour shortages.
Compliance Checks: Ensure adherence to the new wage rates to avoid penalties. Regular audits will be conducted to enforce compliance.
Benefits for Employees
Increased Earnings: Higher wages will enhance financial stability for low-paid workers, improving their quality of life.
Opportunities for Youth: The structured rates for younger workers aim to increase youth participation in the job market and support their skill development.
Other changes:
Increase in National Insurance Contributions (NICs)
One of the most notable announcements is the increase in employers’ National Insurance contributions. This change will add to employment costs, so it’s crucial for businesses to plan ahead and adjust their budgets accordingly.
Action for Employers: Review your financial plans and consider how increased NICs may impact your cash flow. Reach out to your financial advisor to prepare for these upcoming changes.
Employment Allowance Relief
To ease the burden of rising employment costs, the government has increased the Employment Allowance. This move will provide some relief to businesses, particularly small and medium-sized enterprises.
Takeaway for Business Owners: Make sure you are aware of your eligibility for this allowance. It could provide a significant saving on your NICs.
New Anti-Avoidance Measures
The government will introduce new anti-avoidance measures targeting the umbrella company market. This aims to promote transparency and protect workers’ rights.
Employer Responsibility: Ensure compliance with these regulations to avoid potential penalties. Contact us if you use umbrella companies for your workforce for tailored advice.
Preparing for 2025 and Beyond
The adjustments to the NMW and NLW set to take effect in April 2025 reflect a proactive approach to addressing the challenges posed by inflation and the cost of living. As the economy evolves, these changes will play a crucial role in ensuring fair compensation for all workers, particularly those in vulnerable positions. Employers and employees alike will need to adapt to this new landscape, with the ultimate goal of fostering a more equitable labour market.
Staying proactive and informed will be key for both employers and employees.
At Butcher & Barlow, we’re here to help you navigate these legislative changes. If you have questions about how these changes might affect your business, or if you need assistance with compliance, contact our team at Butcher & Barlow. We are here to help you navigate these updates confidently and efficiently.
0161 764 4062