Upcoming Budget Could Impact HR – The UK budget plays a major role in shaping the business landscape, especially for HR departments. With every budget announcement, changes in wages, taxes, and employment regulations come into effect. HR teams are the first to respond, ensuring that businesses remain compliant while balancing their workforce needs. In this blog, we explore how the upcoming budget could impact HR operations and provide insights on how to prepare.
Wage Adjustments: Preparing for Increases
One of the key areas expected in the budget is further increases to the National Living Wage (NLW) and National Minimum Wage (NMW). For the last few years, these increases have been significant, with the government pushing for a higher-wage economy.
For HR teams, this means quick adjustments to payroll systems. The moment these changes take effect, employees must see their wages reflect the new rates. Businesses that employ a large number of minimum-wage workers may need to reassess their overall wage structure. Wage compression can occur when the gap between lower-wage workers and those earning slightly more shrinks. To avoid dissatisfaction and maintain morale, consider implementing proportional wage increases across all pay levels. This ensures your compensation remains competitive and fair.
National Insurance and Employment Taxes
National Insurance (NI) and employment taxes are areas that HR teams must monitor closely. The upcoming budget could introduce new thresholds or changes to the employer contribution rates for NI. Any rise in employer contributions could increase the overall payroll costs for businesses.
HR departments will need to work with payroll teams to ensure the systems are updated promptly.
Higher NI rates may also impact hiring decisions. If the cost of employing someone becomes more expensive, businesses might need to explore flexible staffing models, such as part-time roles, freelancers, or outsourced services. This is where HR can play a pivotal role in reviewing the workforce plan and finding solutions that maintain efficiency without inflating costs.
Pension Reforms and Their Impact
Pension reforms are likely to feature in the upcoming budget. Changes could include adjustments to auto-enrolment schemes or increases to mandatory employer contributions. Any shifts in these areas will directly impact HR as pension schemes must be updated to reflect the new rules.
Auto-enrolment has been a game changer for pension participation in the UK. Recent talks suggest that the government may reduce the age threshold for auto-enrolment or even increase the percentage contribution rates for both employers and employees. While these changes aim to boost retirement savings, they also increase costs for businesses. HR teams should be prepared to communicate these changes clearly to employees, as any rise in contributions will reduce take-home pay.
HR departments should also focus on educating staff about how these pension changes benefit them in the long run.
Highlighting the importance of long-term savings and the security provided by pensions can help alleviate concerns about short-term financial impacts.
Support for Mental Health and Wellbeing
Mental health has become a central focus for many businesses, and the upcoming budget might introduce policies or tax reliefs to encourage more mental health support in the workplace. HR teams could see government-backed incentives to introduce or expand mental health programmes. These might include tax breaks for employers who invest in employee assistance programmes or mental health services.
The shift towards supporting mental health is beneficial for both employees and employers. HR plays a crucial role in implementing these programmes and ensuring staff know how to access the support available. By integrating mental health initiatives into your overall employee wellbeing strategy, you can reduce absenteeism, boost productivity, and improve employee retention. Be proactive in researching government-backed initiatives and stay ahead of the curve when it comes to mental health in the workplace.
Family-Friendly Policies and Tax-Free Childcare
The budget often brings updates to family-friendly policies such as parental leave, tax-free childcare, and flexible working arrangements. These changes can significantly impact working parents.
It is the HR team’s responsibility to ensure these updates are communicated and implemented smoothly.
For example, if tax-free childcare thresholds change, employees may be entitled to greater support. HR will need to inform employees about these benefits and guide them through the application process. Similarly, if changes are made to parental leave entitlements, HR should update company policies and ensure employees understand their rights. Offering flexible working arrangements, especially in response to changing family-related policies, can further enhance your business’s appeal to working parents.
Employee Benefits and Tax Reliefs
HR teams should keep an eye on any updates to employee benefit schemes and tax reliefs that may be introduced in the budget. Programmes like the cycle-to-work scheme, electric vehicle incentives, and other employee benefits could see tax adjustments.
If the government increases the tax-free limits on these benefits, it could make them even more appealing to employees. This would be a great opportunity for HR to promote these benefits as part of the overall remuneration package, helping improve employee satisfaction and retention. Staying informed on changes allows HR teams to enhance the perks they offer without significantly increasing costs to the business.
Employment Law and Flexible Working Policies
The rise of flexible working since the COVID-19 pandemic means the budget may include policies that support or incentivise flexible working arrangements. HR teams will need to adapt quickly if the government introduces new laws around working hours, location, or job-sharing models.
Flexible working isn’t just about remote work. It includes changes to shift patterns, compressed hours, and part-time arrangements. HR teams should already be reviewing their company’s flexible working policy to ensure it aligns with modern practices. If the budget introduces new flexible working standards, HR will need to implement these changes and ensure that managers are trained to handle flexible working requests fairly and efficiently.
Upskilling and Workforce Development
The UK government has been focusing on upskilling and reskilling initiatives, particularly to address the growing skills gap in certain industries. The upcoming budget could allocate more funding towards vocational training, apprenticeships, and other workforce development programmes.
HR departments should stay alert to these initiatives and encourage employees to take advantage of any government-funded training programmes. Promoting upskilling can help businesses remain competitive by ensuring their workforce has the necessary skills to meet industry demands. Moreover, employees who are encouraged to develop their skills feel more engaged and valued, which boosts retention and morale.
What HR Teams Can Do to Prepare
As the budget date approaches, HR professionals should stay informed and prepare for any changes that could affect their workforce. Keep an eye on government announcements and budget leaks, so you have a good idea of what’s coming.
In anticipation of the budget, work closely with your finance team to assess how potential wage increases, tax adjustments, or pension changes might affect your payroll and benefits. Review your internal systems to ensure they can handle any changes smoothly. And, most importantly, communicate with your employees. Keep them informed about what the budget might mean for their wages, benefits, and work-life balance.
The UK budget can significantly impact HR operations. By staying proactive, understanding the changes, and preparing your team for what’s to come, you’ll help your organisation navigate the new landscape with confidence. HR teams are at the heart of these changes, ensuring businesses adapt while keeping employees informed and engaged. The more prepared you are, the smoother the transition will be for everyone involved.
