What is the impact of the Autumn 2024 Budget on property?
As a result of the 2024 Autumn Budget, Employer’s Liabilities will increase adding additional financial pressure to businesses. With the rise in National Insurance, employers are facing an additional 1.2% in statutory costs while the threshold for paying NI has nearly halved. Additionally, the National Living Wage is set to rise by over 6.7%, treble the expected rate of inflation.
Here are the main points impacting organisations in property, as reported by The Guardian:
National Insurance
- Employees will not pay more directly, Reeves says. However, she will raise employers’ national insurance contributions by 1.2 percentage points to 15% from April.
- The government will also reduce a secondary threshold from £9,100 to £5,000 which alone, adds £615 of NI cost for each employee of the business.
- Those measures will raise £25bn a year by the end of the forecast period with the vast majority coming from the lowering of the NI threshold.
- Before the budget, employers were liable for a rate of 13.8% of workers’ earnings above £175 a week. An increase of one percentage point would raise an estimated £8.5bn.
Housing
- The government will spend £5bn on housing, including increasing the supply of affordable housing.
- The government will reduce right-to-buy discounts, and local governments will retain the earnings from council housing sales to allow them to reinvest.
- The government will hire “hundreds of new planning officers” to accelerate housebuilding.
- The rate of stamp duty paid by people buying a second home is to rise. People buying an additional property are already subject to a higher rate, and fro this will rise from from an extra 3% to 5%.
Inflation & Growth Forecasts
- The chancellor will maintain the Bank of England’s 2% target for inflation.
- Inflation will average 2.5% in 2024, rising to 2.6% in 2025, before gradually dropping to 2% in 2029, according to OBR forecasts. Inflation was at 1.7% in September, below the Bank of England’s 2% target, and down from 11% in October 2022.
- The OBR slightly upgrades its growth forecast for this year, but adjusts them down in later years. GDP growth is forecast to be 1.1% in 2024, then 2%, 1.8%, 1.5%, 1.5%, and 1.6% in 2030, Reeves says. At the spring budget under the then Conservative chancellor Jeremy Hunt, the OBR had forecast 0.8% growth this year, 1.9% in 2025, and 2% in 2026.
What is the impact of the Employment Rights Bill 2024?
The upcoming Employment Rights Bill introduces significant reforms, including new “day one” rights that strengthen protections for employees, but at what cost?
According to Littleton Chambers, The Bill itself is unlikely to enter into law until the middle of 2025. And many of the rights will not come into force until further regulations are made by the Secretary of State – currently said to be no earlier than 2026, with unfair dismissal reforms to be implemented ‘no sooner than autumn 2026’.
Whilst making strides for employee rights to ‘modernise and update trade union laws’, this can’t be done without putting employers under greater pressure, specifically SMEs.
SMEs are a key part of the UK economy, accounting for: 61% of employment and making up 99% of UK businesses, according to the UK Parliament.
Here’s a breakdown of the main areas addressed in the Employment Bill 2024:
- Zero-Hour Contracts: Bans exploitative zero-hour contracts, ensuring employees receive reasonable notice of shifts and guaranteed hours contracts.
- Fire and Rehire: Prohibits fire-and-rehire and fire-and-replace schemes, enhancing job security.
- Day One Rights: Introduces rights from the first day of employment, including paternity, parental, and bereavement leave.
- Flexible Working: Requires employers to justify refusals for flexible work requests.
- Sick Pay: Removes the waiting period and lowers the earnings threshold for Statutory Sick Pay.
- Pregnancy Protections: Extends legal protection from dismissal for six months after returning from maternity leave.
- Right to Disconnect: Promotes the “right to switch off” from work.
- Fair Work Agency: Establishes a new agency to oversee fair work practices.
- Trade Union Laws: Modernises trade union regulations.
Below is a deeper dive in key updates which could have the biggest impact to a business in Property and Real Estate.
Day One Rights
- While protection for certain groups has always been in place from day one, this legislation extends these rights. Employers with robust processes can still maintain probationary periods that allow for fair terminations through structured performance reviews.
Parental Leave and Bereavement Leave
- The new law grants statutory unpaid time off for parental and bereavement leave, which many reasonable employers already offer. However, this provision ensures those experiencing bereavement outside immediate family may now take up to one week of unpaid leave, allowing both employers and employees clearer guidelines.
Flexible Working
- This change, while potentially challenging to interpret, sets flexible working as the default wherever practical. The decision remains with the employer, meaning subjectivity could still play a role in whether requests are granted. Additionally, employees may now submit multiple requests within a 12-month period, as opposed to the previous single-request limit.
National Minimum Wage and National Living Wage
- With the pending updates on cost-of-living wage requirements, we anticipate potential impacts from removing age-based pay bands. This could result in increased labour costs, pushing some companies to explore offshoring or increased automation as alternatives.
In principle, these reforms align with any developed nation’s goals to protect employees from unfair practices. However, the bill will also need to strike a balance that allows companies the flexibility needed to respond to market conditions and international competition.