Spring loaded with employer challenges – Arag

Despite some speculation, the government’s first Spring Statement in March was never going to introduce sweeping changes to taxes or major new legislation.

It may have grabbed headlines when announced, but it is April that has seen the implementation of significant measures announced in last October’s budget and before.

While the sobering economic forecasts may now look optimistic in the wake of the global tariff chaos, the most significant announcements – on cuts to personal benefits – were trailed well in advance, with most businesses likely focused on the various changes presented last year that were introduced this month.

Employers had six months to prepare for the 1.2% increase in their class one national insurance contributions, which also saw the threshold above which employers pay them cut to just £5,000. However, the measure has also created headaches for businesses with hefty payrolls by increasing one of their bigger bills.

Minimum wage increases

While smaller firms have the benefit of an increase in the national insurance contributions (NIC) employment allowance for SMEs, which has been increased from £5,000 to £10,500, bigger businesses with lots of workers on lower pay have faced the double-whammy of NI increases and a significant hike in minimum wages.

The increase to the headline national living wage for anyone who is 21 or older from £11.44 per hour to £12.21 may be modest compared to the near 10% hike granted last year, but 18 to 21 year-olds have seen their hourly pay jump from £8.60 to £10 this month.

Employers should also have increased the rates paid to apprentices and any workers under 18, as well as made the smaller adjustments to statutory sick pay and statutory maternity pay.

Parental support

Alongside all of these changes, businesses should also be aware that parents of a newborn child requiring neonatal care can now take up to 12 weeks paid leave, on top of any other leave they may be entitled to, and are eligible from day one of their employment.

This benefit was created in the Neonatal Care (Leave and Pay) Act 2023 but was only introduced from 6 April. While the measure was created by the previous administration, the government has supported its introduction and says it will allow parents to focus on supporting their families without having to worry about losing their job.

While very important to those who are affected, it will obviously apply to a very small proportion of the workforce, with government estimates suggesting up to 60,000 parents may be able to claim some additional leave.

Employment Rights Bill

March also saw the government respond to several consultations that have been held as part of the Making Work Pay proposals and have already fed into a series of amendments to its flagship Employment Rights Bill.

The expansive bill, which addresses rights around statutory sick pay, employment tribunals, industrial action and zero hours contracts, subsequently passed from the House of Commons and on to the Lords, where a third reading is currently scheduled for the end of April.

It’s been a busy Spring for the government’s ambitious plans to reform the labour market and foster growth, but success may be determined by forces beyond its control.