First published on Wednesday, October 30, 2024
Last updated on Thursday, October 31, 2024
Today, the Chancellor, Rachel Reeves, delivered the first Labour budget in 14 years. The budget presents several key pay and tax changes that will significantly impact business owners, including increases to the National Minimum Wage, the National Living Wage, and Employer National Insurance contributions.
But how will this impact you as a business owner? To help you manage the changes effectively, we’ve compiled a list of the most important things you can do to reduce the impact of the tax hikes announced in the Autumn Budget.
How will the Autumn Budget 2024 impact my business?
Increased costs
The increase in Employer Contributions (NICs) by 1.2% from 13.8% to 15% from April 2025, and higher National Minimum Wage and National Living Wage will add immense financial pressures on businesses, as they will need to absorb higher payroll costs.
Many small businesses are still recovering from the Pandemic and managing rising costs in their business, including high supplier and manufacturing costs.
While higher minimum wages align with inflation adjustments and traditionally rise every year, the combined impact of wage changes and NIC increases will challenge companies with tight margins, like those in hospitality and retail.
HR will likely play a pivotal role in helping businesses navigate these challenges by focusing on automation and streamlining HR and pay processes for efficiency.
Use our Payback Calculator below to see how streamlining your HR processes with BrightHR can help you deal with the additional tax burden.
Recruitment and retention
HR teams across industries will need to adjust their hiring and workforce strategy to account for rising costs. With rising wage and operating costs, HR teams may need to consider non-monetary benefits and flexible working options to retain talent.
Staff retention will be key, and businesses will need to consider how they can improve their employee benefits package and performance management strategy to retain top talent, including by focusing on employee praise, e-learning, and professional development opportunities.
“Small businesses may have to limit recruitment as the cost of employing someone will rise significantly due to wage and Employer National Insurance contribution increases.”
Upskilling will also be key to reducing the impact of these changes. Small businesses will need to focus on skills initiatives like e-learning to keep high-performing talent engaged.
Payroll updates must be made
Rising employer NICs and an increased minimum wage will add to mounting payroll and tax pressures on small business owners. Business owners will need to ensure their payroll accurately reflects the rate changes and tax hikes announced in the Budget before April 6th, 2025, to avoid both further costs in the form of financial penalties and enforcement from HMRC.
Having a reliable and compliant payroll software will be essential for business owners to ensure they account for the changes and avoid costly penalties and enforcement from HMRC.
“Businesses who managed to navigate wage hikes last year are now expected to swallow another huge rise to National Minimum and Living wages. On top of this, all small businesses may have to curb the amount of salary increases and profit share they can offer to their employees.”
Top tips for managing Autumn Budget changes effectively
Familiarise yourself with these topics straight away
If you haven’t already familiarised yourself with topics such as employer National Insurance contributions, you can read our article 'What is employer National Insurance?', to further understand the impact on your business and workforce. A better understanding will help you minimise the impact of the changes on your business.
Understand the implications of failing to manage the changes
Failing to manage the increases to National Insurance Contributions (NIC) and the National Minimum Wage (NMW) correctly could result in significant financial penalties of up to £20,000 per worker for underpayment.
Employers may also need to make back payments at current NMW rates, face additional charges for PAYE/NIC and the Apprenticeship Levy, and risk criminal prosecution for persistent non-compliance.
“Plus, businesses could suffer reputational damage from being publicly named and shamed by HMRC. Understanding these risks is important when seeking to navigate the Autumn Budget effectively.”
Seek expert support from qualified experts to help understand what steps you need to take to remain compliant and minimise costs.
Optimise efficiency in your HR and Payroll
With several sweeping changes set to impact how you pay your staff, efficiency is king when trying to minimise costs and administrative burden.
Business owners must ensure they have accurate and efficient payroll processes in place to handle significant adjustments to wages, NI contributions, and sick pay, among other pay and tax changes announced in the Budget. By conducting payroll in-house without external expertise, business owners risk being hit by additional payroll costs at a time when financial control will be paramount.
Payroll mistakes are very easy to make, especially when rates change, putting businesses at risk of costly penalties and enforcement actions from HMRC. By utilising an integrated payroll and HR solution with full support from CIPP-qualified professionals, business owners can ensure they are fully prepared for the tax increases coming in April next year and avoid additional costs from fragmented and inaccurate payroll processes.
BrightHR Payroll helps you stay compliant by automatically accounting for statutory rates of tax and pay rates, combining your HR and Payroll processes to maintain a single source of truth and minimise time spent on admin.
Need more support navigating the Autumn Budget 2024?
With so many changes announced, understanding the impact of the budget can be difficult at first glance.
BrightAdvice is a 24/7 advice line offering expert employment law advice to help you stay on top of evolving rules and changes.
Book a free demo today or call 0800 470 2432 for advice on the Autumn Budget and much more.
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