The UK is entering a new phase of economic and employment legislation under the newly elected Labour government. With significant changes introduced in the Autumn Budget 2024 and upcoming reforms to employment rights and statutory sick pay (SSP), businesses and workers must prepare for a shifting regulatory landscape.
In her session, Preparing For The New UK Payroll Tax Year, Jo Marshall explores the key developments and their implications.
Autumn Budget 2024: Key Payroll and Tax Changes
The Autumn Budget, delivered on 30th October 2024, introduced several fiscal changes, particularly affecting employers. A major focus was placed on National Insurance contributions:
No Increase in Employee Taxes: The Labour government, in line with its manifesto promise, did not increase income tax for employees.
Employer National Insurance Increases: Employers will now pay a higher National Insurance rate of 15% on earnings above the secondary threshold, which has been lowered by over £4,000. This will have a significant impact on employer costs.
Employment Allowance Expansion: To offset the employer NIC hike, the Employment Allowance has been doubled to £10,500. More importantly, the restriction limiting eligibility to small businesses has been removed, allowing broader access.
Frozen Personal Allowance and Tax Thresholds: The personal allowance remains at £12,570 until at least 2028. With inflation and rising wages, more workers will be pushed into higher tax brackets over time, increasing the overall tax burden.
Employment Rights Bill: Strengthening Worker Protections
One of the Labour government’s key priorities has been enhancing worker protections through the new Employment Rights Bill. Key measures include:
Parental Leave as a Day-One Right: Under the proposed reforms, paternity and shared parental leave will be available from the first day of employment, removing the current length-of-service requirements.
Extended Bereavement Leave: The bill aims to expand bereavement leave beyond the loss of a child, potentially covering the death of close relatives such as parents, spouses, and siblings.
Creation of a Fair Work Agency: A new single enforcement body, the Fair Work Agency, will oversee compliance with worker rights, including minimum wage enforcement, holiday pay, and statutory benefits.
Stronger Holiday Pay Protections: The bill seeks to simplify and clarify holiday pay calculations, ensuring employees receive their entitlements without ambiguity.
Strengthening Statutory Sick Pay (SSP)
SSP has remained largely unchanged since its introduction in 1983, but the Labour government is pushing forward with significant reforms:
Day-One SSP Entitlement: The government plans to remove the current earnings threshold, making SSP available to all workers from day one, regardless of income.
Abolition of Waiting Days: Under current rules, SSP is only payable from the fourth consecutive day of illness. The proposal seeks to remove this waiting period, allowing for immediate payment of SSP.
Revised Payment Structure: To accommodate lower-paid workers, the government is considering a percentage-based SSP model, similar to parental pay calculations. This could replace the flat-rate system with payments based on 50-90% of a worker’s average earnings.
Employer Cost Concerns: The burden of funding SSP remains on employers, with no recovery mechanism in place. Businesses will need to prepare for potential cost increases, particularly for short-term illnesses.
The Autumn Budget 2024 and the Labour government’s legislative agenda signal a strong shift towards worker protections while increasing costs for employers. The rise in employer National Insurance, expansion of employment rights, and reforms to SSP will have wide-reaching implications for payroll and HR policies. Employers must stay informed and adapt their practices to ensure compliance and financial stability in the evolving regulatory environment.
For the full session, please click here. Jo Marshall covers the following topics during this course:
- Tax: Rates and thresholds
- NIC: Increase to secondary rate and threshold
- Student Loans and Statutory Payments
- New neonatal statutory pay and leave
- Expense and Benefits
The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article. The information at the time of publishing was accurate and could be subject to final changes.
