Jeremy Hunt presented the Autumn Statement to Parliament, setting out billions of tax rises and spending cuts.
So, what does it mean for HR?
National Living Wage
It has been confirmed that the National Living Wage will increase from £9.50 an hour for over-23s to £10.42 from April 2023.
Hunt has said that for a full-time worker, this represents an annual pay rise worth over £1,600.
Pensions to rise in line with inflation
Pensions are to rise by 10.1 percent, Hunt says, to rise in line with September’s inflation rate.
Sticking to its “triple lock” on the state pension, the Government is fulfilling their manifesto pledge that the state pension would rise in line with the average wage increase, September’s inflation figure, or 2.5 percent.
The income tax burden
The Chancellor will raise revenues by freezing some tax allowances and thresholds. This means that income taxes will only rise by 1 percent over the next five years.
However, this still means that the tax burden is likely to be among the highest for at least 70 years.
The point at which the highest earners start paying the top rate of tax is also being lowered. It is being lowered to £125,140 from £150,000.
Commenting on the statement, Alan Price, CEO at BrightHR says:
“In today’s Autumn Statement, the Chancellor confirmed the rate of the National Living Wage will increase from £9.50 per hour to £10.42 per hour in April 2023. This 9.7 percent increase marks the largest ever increase to National Living Wage (NLW) rates. Employers should work with HR and payroll teams to implement the change and communicate it with the wider workforce.
“However, it’s important to remember that the NLW only applies to workers aged 23 and over; the remaining rates in the National Minimum Wage structure are still to be announced.
“Whilst the increase is welcome news for employees, many will still struggle as inflation and the cost-of-living continues to put pressure on household incomes. As such, employers should ensure there is wider support in place to facilitate positive financial wellbeing.
“Similarly, increased wage bills may cause concern for employers who are facing soaring expenses in all parts of their business. This could lead to tough decisions and the need for organisational changes. Where this is the case, employers must make sure they follow fair processes and consult fully with their workforce.”
Minimum wage rise is ‘double-edged sword’
Recruitment Agency, Aspire, says:
“Those with the broadest shoulders are set to bear the greatest tax burden, which is right. And reducing the higher rate income tax and capital gains tax thresholds is fair.
“The Chancellor said the OBR expects unemployment levels to reach 4.9% in 2024, which is why it’s disappointing that this Budget doesn’t do more about employers’ national insurance. Lower employment taxes incentivise hiring, giving business breathing space to retain staff and helping to maximise tax receipts.
“The announcement on NICs could force employers to cut costs – and redundancies are usually the path of least resistance. Then the exchequer loses the combined national insurance and income tax, on top of reduced corporation tax.”
“While the increase to the national living wage is essential for the lowest paid workers, it’s a double-edged sword. Many small businesses facing crippling energy costs will struggle to meet the 9.7 percent increase in wages. Some are hanging on as it is, so being expected to pay employees more could be the final straw.”
“The Chancellor also failed to address issues around IR35, which could have been resolved by repealing the reform and introducing greater accountability for contractors to determine their IR35 status.”
Matt Fryer, MD of Brookson Group, comments on the impact of the Autumn Statement on contractors and the flexible workforce:
“This Autumn Statement and last month’s reversal of the measures announced in the Growth Plan mean that everyone is paying more tax, but this is especially true of contractors and the self-employed. Due to the structure of their businesses, independent contractors are particularly hit by today’s cut to dividend allowances and the previously announced increase in corporation tax rates.
“This is short-sighted. The economy needs flexible talent to support growth, including the infrastructure and energy independence projects that the Chancellor has prioritised. Contractors are available to work as and when their skills are required and the personal risks associated with this flexibility should be reflected in the tax system.
“Some may decide to seek permanent employment as a result of this budget, but contracting is not just about the money; it is a flexible lifestyle choice. If the Government is not going to incentivise the flexible workforce, businesses need to consider what else they can do to continue to make contracting an attractive option. This might include access to improved services or benefits, in compliance with the off-payroll working rules.”
Ian McVey, Managing Director EMEA, Visier, comments:
“Whilst the budget touches upon increasing inflation and the rising cost of living, businesses are still going to be challenged with riding out the looming downturn and will feel the pressure of supporting their employees who are going to directly feel the impact of the freeze on income tax allowances.
“Economic uncertainty is already having a tangible impact on workers in the UK. According to Visier data conducted by Censuswide, employees are already concerned about job security in a new role (57%) as the “last hired, first fired” mentality takes grip, with four in ten also worried about having to settle for a lower salary if they switch roles. And, as the cost of living continues to rise, 79 percent said that they think their employer has an obligation to support them in managing this.
“It is likely that a large onus is going to fall on businesses to support their employees, whilst navigating a turbulent market. Employers will need to find ways to communicate honestly and openly about the current challenges businesses are facing with their employees to ensure they feel supported and to reassure them that the business is there for them”.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
- Amelia Brand
- Amelia Brand
- Amelia Brand
- Amelia Brand
