As businesses brace for the upcoming October budget, CMD Recruitment highlights the need for strategic preparation amid potential economic changes that could affect recruitment, workforce planning, and overall operations.
In light of these anticipated changes, CMD Recruitment is proactively monitoring budget proposals and legislative reforms to better support businesses navigating these evolving landscapes. It’s crucial for companies to stay informed and prepared, just as it’s essential to understand processes like obtaining an employment verification letter when managing workforce documentation.
Rising Taxation: A Key Concern
One significant issue that businesses might face in the forthcoming budget is the potential increase in taxation. The government is expected to propose higher National Insurance contributions and Corporation Tax, which could intensify financial pressures on payroll and operational costs.
For instance, a projected 2% rise in National Insurance contributions could mean an additional £1,000 annually for each full-time employee.
These rising costs could prompt businesses to adopt a more selective hiring approach, prioritising candidates who offer considerable returns on investment while eliminating roles that may not justify the increased expenditure.
Potential Changes to Employment Law
In addition to tax hikes, several employment law reforms under consideration could impact hiring practices, terminations, and workforce management strategies.
Dan Barfoot, Operations Manager at CMD Recruitment, noted: “One significant change being discussed is the extension of unfair dismissal protections to include the first day of employment. At present, employees are required to serve a minimum of two years before they can make an unfair dismissal claim.
“If this protection takes effect from day one, companies will need to reconsider how they manage probation periods. This shift could make the traditional approach to trial periods more precarious, possibly leading to cautious hiring practices and stricter performance management.”
Changes to Statutory Sick Pay (SSP) are also on the table, potentially allowing sick pay from the first day of employment and increasing the SSP rate.
The removal of the lower earnings limit could mean all employees qualify for sick pay, increasing financial pressures, particularly if an employee is absent for an extended period.
Recruitment Landscape Challenges
With recruitment already proving difficult for many organisations, the anticipated budgetary and legislative changes could further complicate the landscape.
Dan explained that companies are encountering increased expenses associated with taxation, wages, and employee benefits. For example, a 2% increase in National Insurance contributions combined with a 5% rise in the National Minimum Wage could raise the cost of employing a full-time worker by approximately £1,500 per year. Companies may need to revise their hiring budgets and be more discerning when filling vacancies.”
Strategies for Businesses to Adapt
In light of these potential changes, CMD Recruitment advises businesses to take proactive measures to mitigate negative impacts:
Assess Current Workforce
For employees with less than two years of service, this is an opportune time to evaluate their performance and determine if adjustments are necessary before the new unfair dismissal protections are enacted.
Financial Planning Adjustments
Businesses should prepare for likely increases in the National Minimum Wage, Statutory Sick Pay, and National Insurance contributions, as these will have a direct effect on financial planning for 2025 and beyond.
Enhance Recruitment Strategies
Given the increasing challenges in recruitment, it’s vital for businesses to refine their hiring processes. Employers should concentrate on creating clear job descriptions, setting probationary goals, and implementing thorough pre-employment screenings to select suitable candidates from the outset.
Update Employment Contracts
With anticipated changes in employment law, companies will need to revise their employment contracts, policies, and handbooks. CMD Recruitment is ready to assist with these updates once the final details of the changes are confirmed.
Dan concluded that the October budget and the suggested legislative reforms pose a challenging landscape for businesses, particularly in terms of recruitment and managing their workforce. The rise in operational costs, stricter employment laws, and heightened compliance requirements will necessitate swift adaptation by businesses.
By proactively addressing these potential scenarios now, organisations can better navigate the challenges and opportunities presented by the upcoming budget and legal reforms. CMD Recruitment is here to help you stay ahead in this changing environment.