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Autumn statement: Key points from a people-management perspective
Chancellor Jeremy Hunt issued an ‘Autumn Statement for Growth’ on 22 November, with a blizzard of more than 100 measures designed to “raise business investment, get more people into work, reduce inflation next year and increase GDP”.
Here, we highlight the points that are of particular relevance to employers and their staff, which include changes to pensions, taxes, benefits and the minimum wage.
The full details on the autumn statement are available on the Government website.
- Currently, employees pay 12% National Insurance on earnings between £12,570 and £50,270. From 6 January 2024, this rate will be cut to 10%.
- Compulsory Class 2 National Insurance payments will be abolished for the self-employed from April 2024.
- Class 4 National Insurance payments will be reduced for the self-employed from 9% to 8% from April 2024.
The Chancellor expects employees on the average salary of £35,000 to save over £450 as a result of his decision to cut NICs, making it a move that is likely to be welcomed by workers.
However, in the absence of increases to the personal allowance and other tax thresholds, commentators have pointed to the fact that this cut should be seen in the context of increasing numbers of workers being pulled into higher bands.
Indeed, the Office for Budget Responsibility (OBR) has forecast that an additional £44.6 billion will be generated in annual tax revenues as a result of fiscal drag, while the planned reduction to National Insurance will save up to £10 billion.
- A ‘pot for life’ consultation to be launched, exploring the right of savers to request that a new employer pays contributions into an existing pension pot.
- An increase to the state pension of 8.5% from April 2024, honouring the ‘triple lock’ guarantee and resulting in an increase of up to £17.35 per week.
In calling for evidence on the idea of a ‘Lifetime Provider Model’, the Chancellor said he is aiming to simplify the pensions market and provide better outcomes for savers. If it were to go ahead, the scheme would give employees the option to ask their employer to pay into an existing pot.
Groups have lobbied for this change to help address the issue of individuals accruing multiple pension pots of relatively small value after being auto-enrolled on defined contribution schemes when joining new workplaces.
However, others have urged caution, warning of the need for increased financial education among employees and a potentially higher administrative burden on employers.
- An increase to the National Living Wage of 9.8%, taking the hourly rate from £10.42 to £11.44.
- National Living Wage age threshold reduced from 23 to 21 from April 2024.
- National Minimum wage rates for 18 to 20-year-olds increased by £1.11 to £8.60 per hour.
The Treasury has labelled this measure a “record wage boost”. Nearly 3 million workers are expected to benefit, with full-time workers receiving an additional £1,800 a year.
While broadly welcomed, the measure has also sparked some concern among employers, with an increase to staff costs potentially impacting on wage budgets and hiring plans.
Work and skills
- Reform of the Fit Note process and the Work Capability Assessment.
- £50m funding for a two-year pilot scheme designed to increase the number of apprentices in engineering and other “key growth sectors”.
- An increase in minimum hourly pay from £5.28 to £6.40 to for apprentices aged between 16 and 18.
Alongside the previously announced £2.5 billion Back to Work Plan, the changes launched in the Autumn Statement form part of the government’s approach to “tear down barriers to work for over 2.4 million claimants.
As well as the unemployed, this includes the long-term sick and disabled, who are being offered a ‘Chance to Work Guarantee’. As part of the plan, the Government has also pledged provision for mental health treatment and employment support for nearly 500,000 more people.
The Chancellor said reviewing the Work Capability Assessment activities and descriptors reflected “greater flexibility and availability of home working after the pandemic”, with changes will be implemented no earlier than 2025. According to government data, people are more than three times more likely to be written off work today than they were in 2011.
However, the measure has been met with criticism from some charities and claimants, who fear the reforms will lead to a squeeze on household income.
In summary, while there might not have been any major surprises in the Autumn Statement, the announcements made by the Chancellor introduce some key changes for employers and employees.
Aside from the requirement for shorter-term changes – accommodating the National Insurance reduction within payroll and compliance with new minimum wage rates – it further underlines the government’s ambitions for more fundamental reforms in areas such as productivity and pensions.
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