'Short sighted' | What HR needs to know about the Autumn statement

What HR needs to know about the Autumn statement

Chancellor Jeremy Hunt his Autumn Statement in the House of Commons last week, with tax rises and spending cuts among the headline announcements.

With the country still reeling from the impact of ex-chancellor Kwasi Kwarteng’s disastrous mini-budget in September, Hunt unveiled a series of sweeping financial reforms for the UK, with the main concerns for businesses being:

  • Support worth £13.6bn will be provided over the next five years to help firms with business rates, including a mixture of freezes and reliefs.

  • The UK's inflation rate is predicted to be 9.1% this year and 7.4% the following year.

  • Unemployment expected to rise from 3.6% to 4.9% in 2024

  • The minimum wage for people aged over 23 to increase from £9.50 to £10.42 an hour from next April - this represents an annual pay rise worth over £1,600 pounds to a full-time worker.

To scratch beneath the surface of the myriad of announcements made by the Chancellor, HR and employment experts offered their insights to HR Grapevine below.

Ronni Zehavi, Co-Founder and CEO at HiBob, offered insight on what the Autumn Budget means for employers.

He said: “[the] budget officially acknowledged that the UK has entered a recession, while offering little support to employers to help us navigate this economic crisis. With the unprecedented combination of the recession, low unemployment, and a serious skills shortage in the international talent market, 2023 now promises another year of uncharted territory.

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“This amount of change brings complexities for businesses that go beyond the financial. Naturally, people will be affected by the uncertainty change brings and may start to lose confidence in their job security. This could lead them to lose focus or become demotivated in their roles opting to look for other jobs. Conversely, they might also begin to suffer from stress and this will inevitably impact their mental health, satisfaction levels and productivity. Employers need to be mindful and think holistically. They need to be transparent about company plans and focus on finding ways to keep employees engaged and happy. In the face of inflation, nothing speaks louder than a salary hike. But for companies on a strict budget, HR leaders must think strategically about how they can offer creative benefits packages to retain talent and continue to attract the people they need – all while keeping the business lean.

“When it comes down to it, there’s nothing anyone can do to slow down changes following the budget. However, supporting versatile strategies and agile workforces is the only way to resolve some of these complexities and power through the constant change headwinds.”

‘Surprisingly upbeat’

Ben Chaplin, Managing Director at Croner, said: “This Autumn Statement marked a return to normal after the headline-grabbing surprises of Kwasi Kwarteng’s mini-Budget. The emphasis here was on stability, growth, and public services to ensure that the markets were not flustered. But there were some major announcements.

“This was a Budget about weathering the financial storm whilst reinforcing the economy’s foundations so it can return to significant growth. Continued capital expenditure on infrastructure being a good example. The Office for Budget Responsibility seems generally supportive. The tax increases were substantial but widely spread and the introduction of a new windfall tax will steal some of the Opposition’s thunder. The preservation of COP26 targets will also be a reassurance for many. The tone was surprisingly upbeat – possibly because the bad news had been communicated in the run up to the speech.”

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‘Short sighted’

Matt Fryer, MD of Brookson Group, a People2.0 Company, said: “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.”

N.I. rise will give HR food for thought

Alexandra Farmer, Head of Team and Solicitor at WorkNest, said that, with the rise in the National Living Wage mentioned in the budget, she expected a number of businesses will assess their workforce.

“Do they need all the employees they have? Can they make efficiencies to allow them to reduce the overall headcount? If so, we could be looking at an increase in redundancies over the next few month,” said Farmer.

“It’s likely businesses will want these completed ahead of the rise in April to limit costs (i.e. redundancy payments and notice payments would otherwise be calculated using the higher rate of pay once it comes into effect).

“Unfortunately, it’s not an option to not pay the living wage for employees over 23. Furthermore, I expect all other rates to rise in similar fashion, albeit those rates don’t appear to have been announced yet.

“If an employee doesn’t believe they’re being paid correctly, they would normally raise a grievance with their employer in the first instance. Then, if they’re still unhappy, they can make a complaint to HMRC and/or make a claim to an employment tribunal.”

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