Chancellor Jeremy Hunt’s 2023 Autumn Statement last month made a number of announcements in respect of employment and immigration law that will impact employers. Although some of the proposed changes are still in their infancy, there are a number of updates that employers should be aware of.
UK employers should review current pay rates for both salaried and hourly paid workers following the announcement that NLW rates will rise from 1 April 2024. As well as an increase of 9.8% to £11.44, the government have also lowered the threshold to which NLW applies from 23 to 21 years’ old.
This change is expected to benefit 2.7 million low paid workers and as such, employers are encouraged to review whether they will need to increase both what salaried and hourly paid workers earn, to comply with the new legislation. This is because, once the increase takes effect, the minimum annual salary for a worker aged over 21 working 37.5 hours a week will be more than £22,300. For employers who are already paying staff at the NLW, from next April this will cost an additional £1.02 per hour per employee.
These increases will also apply to individuals who are on sponsored visas, meaning that employers of sponsored workers over the age of 21 will need to pay them the new hourly rate, rather than the current minimum hourly rate set out in the Immigration Rules.
The chancellor also announced a reduction in national insurance contributions (NICs) for both employees as well as self-employed workers.
From April 2024, class 4 self-employed workers will benefit from a 1% NI deduction, as well as a complete abolition of class 2 NICs. At £3.45 a week, this change will bring large savings for self-employed individuals.
Employees will also benefit from a NI reduction, with class 1 employee NICs being cut from 12% to 10%. This will bring about the lowest combined tax rate of 30% since the 1980s.
A core focus of the chancellor’s announcement was providing additional support to individuals with disabilities or long term health conditions to get back into and stay in work. Part of this process is a proposed reform to the current fit note system. This includes a proposed redesign of the fit note form itself, as well as the introduction of trigger points for employees to be referred to their GP. The government are trying to encourage an approach of treatment being the default, rather than time off work.
The government’s consultation in 2024 will tell us more about how the fit note reform may look in practice.
As a further part of the government’s aim to keep people in work, they will also establish an expert group to develop a voluntary minimum framework for quality OH provision. This will set out the minimum level of occupational health intervention that employers could adopt to help improve employee health at work. There is a collaborative aim to help employees with long term health conditions to stay in work and prevent employees from becoming inactive due to ill health.
A further announcement is a consultation on a plan designed to give British workers one pension ‘pot for life’. Despite warnings that this would be an administrative nightmare, this aims to streamline the pension process for employees and ensure that no pension pots are ‘lost in the system’. Rather than employees transferring between pension schemes when they commence new employment, the new employer would be able to make payments into the existing pension scheme.
Whilst the proposal is subject to consultation, the government, alongside the Department for Work and Pensions (DWP) have concluded that a lifetime provider model would provide more net benefits to employees.
These tax anti avoidance rules ensure that a worker pays the same income tax and national insurance as an employee does. The government has confirmed that it will introduce new offset rules, which will allow “HMRC to reduce the PAYE liability of a deemed employer to account for taxes paid by a worker and their intermediary where an error has been made in applying the off-payroll IR35 rules”. This will be available for arrears going back to April 2017. More will become clear about these changes as the legislation begins to take shape.
If you have any questions about the announcements made in the Autumn Statement, or want to know what it could mean for your business, please contact Ashfords’ employment or immigration team to find out how can we assist you further.