- December 8, 2022
- Posted by: Hannah Ingram
- Categories: Legislation Changes, Pay, Reward & Benefits
Highlights and key takeaways for Payroll, HR and Recruitment
Exploring the depths of the Autumn Budget and what it means for 2023 from employees to payroll with extra insights for business leaders.
Inflation has seen the Consumer Prices Index including owner occupier’s housing costs (CPIH) rise 8.6% in the 12 months to August 2022 and the government is looking to balance stability of the economy against fairness as well as supporting the most vulnerable.
This article addresses the main things to take away from the budget.
Exploring the Top Changes for Employment: Payroll and HR
National Living Wage in 2023
Low paid workers see increase from 2023 onwards
The government has responded to the cost-of-living crisis for low paid workers with the National Living Wage (NLW) rising from 1st April 2023; this will see a 9.7% increase to £10.42 an hour for those aged 23 and over.
In the future this age threshold is expected to extend to those over 21, benefitting over 2 million low paid workers with a £1,600 increase in annual earnings for a full-time worker.
NMW (National Minimum Wage) rates will also change slightly from April 2023, rising per hour:
• In 21-22 years to £10.18 (up 10.9%),
• 18-20 years to £7.49 (up 9.7%)
• 16-17 years to £5.28 (up 9.7%)
• Apprentice rate is now £5.28 (up 9.7%)
• Accommodation offset rate is £9.10 (up 4.6%).
What’s new with National Insurance Contributions?
Keeping up with the NI changes
This summer saw National Insurance Contributions (NICs) rise in July from £9,880 to £12,570 and in November the Health and Social Care Levy was reversed saving just under 30 million workers an average of £480 during 2023-2024.
From April 2023-2028 the government will fix the level at which employers start to pay Class 1 Secondary NICs (the second threshold) for their employees. This will be fixed at £9,200. This means 40% of businesses will not need to pay NICs with the largest employers contributing the most.
Income Tax Changes
Spreading the cost with the emphasis on high earners
Income Tax will be fixed until April 2028 including income tax Personal Allowance (PA), higher rate threshold (HRT), the National Insurance Contributions (NICs) Upper Earnings Limit (UEL) and Upper Profits Limited (URLs). This is two years longer than the current fixed term. The additional rate threshold will see a drop from £150,000 to £125,140 from 6 April 2023.
With a focus on fairness the government is looking to spread the pain of restoring public finances with everyone contributing but with more weight on those with the highest profits or incomes.
In addition, other personal tax thresholds within Income Tax, Inheritance Tax and NICs will be fixed for another 2 years from it’s current status, right up to April 2028.
Company Car Tax Calculations
VED change sends shock waves for electric vehicle owners
The Autumn budget is fixing the rates for Company Car Tax until April 2028 to add long-lasting certainty for taxpayers and encouraging more people to switch to electric vehicles.
The electric vehicle market is growing rapidly with sales doubling in 2021 with a new record of 6.6 million sales compared with just 120,000 electric cars sold worldwide in 2012!
One big introduction is that from April 2025 electric vehicles will be subject to VED (Vehicle Excise Duty) for the first time.
In addition from the 6th April 2023, car &van fuel Benefit Charges and van benefit charges will see increases in line with CPI.
Tax Reductions for married couples and blind people
In 2023-2024, both the Married Couple’s Allowance (which will be valued between £4,010 and £10,375) and the Blind Person’s allowance (valued at £2,870) will be uprated by the September CPI figure of 10.1%.
Our Talk Staff Top Tips
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Interesting Autumn Budget Takeaways for HR and Hiring Managers
Changes to National Living Wages
Whilst this news will be music to the ears of low paid workers it will put large employers under strain especially when coupled against energy prices. It may also mean employers paying just above the living wage will have to consider other benefits to retain their staff and stay ahead of the game.
In-Work Conditionality for Universal Credit claimants
A roll out will begin in September 2023 in a long-awaited attempt to support individuals with making the leap from Universal Credit (UC) to earnings and for more people to move off benefits entirely.
The Social Security Advisory Committee is making recommendations to the DWP to encourage more people into work.
The forum says: “Some disabled people and people with health conditions receiving income replacement benefits would like to work in the future, and believe that they could do so with the right job and the right support, but the social security system is not always effective at helping them to do so.”
And this is significant as in the summer of 2022 around 2.5 million people cited long-term sickness as their main reason for economic inactivity, up significantly from around 2 million in 2019.
This may open up the doors to more part time working arrangements the gig economy is growing, offering benefits for employers and employees alike, especially start-ups and small businesses who may not be able to afford full time expertise.
Boosting Growth and Productivity by Investing in people
The Autumn budget focuses on ‘investing in people, infrastructure and innovation’ looking to deliver planned skills reforms.
When skills drive growth
The government aims to roll out skills boot-camps, approve higher technical qualifications and introduce the Lifelong Learning Entitlement from 2025 and has appointed an advisor to help with this.
The government has praised our top universities with 31 producing up to 13% of the world’s “impactful research”. However, there is also a concern that changing rules for freedom of movement will discourage international students and directly impact innovation and the UK’s presence on the world stage.
The challenge for talent acquisition
Despite employment being 3.6% in Q3, at one of the lowest levels in 50 years this is offset to an extent by the long-term sickness figures mentioned earlier. 630,000 more people are inactive now compared to pre-pandemic levels.
In fact working place inactivity is so high that the Financial Times states that “On current trends, the UK will soon be the only country in the OECD (Organisation for Economic Co-operation and Development) where the workforce remains smaller than it was before the pandemic.”
This is driving wage growth to 6% as companies struggle to hire great talent, whilst at the same time some sectors are seeing a rise in lay-offs, especially in the tech industry. Meanwhile other sectors such as energy are seeing record profits, the Autumn budget has added several sections to tackle this so that energy companies do their bit.
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Insights for Business Leaders
Business support continues
As the great lay-offs continue a lot of businesses large and small are struggling with the costs of living putting more jobs at risk.
The government has set out targeted support for business rates costs, worth £13.6 billion, over the next 5 years with business rates multipliers being frozen in 2023-2024 and upward transitional relief caps will provide support to ratepayers who face large increases in their bills following the revaluation.
Small businesses will see extra support with increases and extensions in relief for retail, hospitality and leisure sectors.
This will help businesses with the costs of retaining staff and allow other businesses to grow.
East Midlands boost with Made Smarter Adoption
SMEs (small and medium sized businesses) in the manufacturing sector will see a uplift in their productivity by taking advantage of the Made Smarter Adoption being rolled out to the East Midlands, this programme has already seen success further North and in the West Midlands.
This initiative will help employers and employees alike with productivity and efficiency.
Opening the competition doors digitally
The Digital Markets, Competition and Consumer Bill is being brought forward to bring in new powers to tackle anti-competitive practices in digital markets that are allowing certain competitors to dominate. The hope is this will see more start-ups within these markets, spurring on innovation and giving consumers more choice and better quality options.
Greater competition in this market could see a boost to marketing and IT based roles amongst others within digital start-ups.
UK producers will see tariffs removed on over 100 goods for two years, reducing cost pressures, and these changes could be as high as 18%. Goods could include everything from aluminium frames to ingredients used by UK food producers.
This will ease some of the pressure off employers effected by the upcoming wage increases, Whilst these changes are great news for lower paid workers it will add added pressure for large employers such as those in the manufacturing industry and construction.
The world is in a constant state of flux and changes will continue to impact the dynamics of your team. Our organisational development team Designed4Success help you build resilience and keep your team collaborating at a high level.
If you need some help keeping your team not only performing at the best together but protecting their wellbeing too then speak to us.
Autumn Statement in Full.
The original Autumn statement in full can be read here.
Last Updated on 4 months by Gary Parsons