Businesses should prepare for several potential economic shifts ahead of the October budget, which could significantly impact recruitment, workforce planning, and general business operations.
CMD Recruitment has been closely following the upcoming budget and proposed legislative changes to ensure it can support businesses in navigating these challenges.
While some changes may be difficult, they could also present opportunities for businesses that are adaptable.
One of the key concerns for businesses in the forthcoming budget is the possibility of higher taxes. The government could raise revenue through increased National Insurance contributions and Corporation Tax, which would put additional strain on payroll and operating costs.
For example, a 2% rise in National Insurance contributions could increase the cost of employing a full-time worker by roughly £1,000 annually.
These additional costs may prompt businesses to be more selective in their hiring decisions, prioritising roles that provide substantial returns on investment and avoiding positions that don’t justify the higher expenses.
Beyond tax increases, the government is also considering a range of employment law reforms that could affect hiring, dismissals, and workforce management strategies.
Dan Barfoot, Operations Manager at CMD Recruitment, commented: “One of the most significant changes under discussion is extending unfair dismissal protections to the first day of employment. Under current law, employees must complete two years of service before they can bring an unfair dismissal claim.
“If this protection is granted from day one, businesses will need to rethink how they manage probation periods. The traditional approach of ‘trying out’ a new hire may become much riskier, potentially leading to more cautious hiring practices and stricter performance management protocols.”
Further proposed changes to Statutory Sick Pay (SSP) could see SSP granted from the first day of employment, along with an increase in the SSP rate.
The removal of the lower earnings limit would mean that all employees, regardless of income, would be entitled to sick pay. This could increase financial strain for employers, particularly if an employee’s absence extends over several weeks.
Recruitment is already becoming more difficult for many businesses, and the expected changes in both the budget and employment law will add to these difficulties.
Dan continued: “Businesses will face rising costs related to 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 increase the cost of employing a full-time worker by around £1,500 per year. Companies may need to adjust hiring budgets and be more selective about filling vacancies.”
Preparing for the Changes: Business Actions
In light of these potential changes, CMD Recruitment advises businesses to begin preparing now to reduce any negative effects. Key recommendations include:
- Reviewing Current Employees: For employees with less than two years of service, now is the time to assess performance and consider necessary actions before any new unfair dismissal protections are introduced.
- Budget Adjustments: Prepare for likely increases in National Minimum Wage, Statutory Sick Pay, and National Insurance contributions, which will impact financial planning for the years ahead.
- Improve Recruitment Processes: With recruitment becoming increasingly challenging, it’s important to streamline hiring practices. Ensure job descriptions are clear, set probationary goals, and conduct pre-employment screening to select the right candidates.
- Updating Contracts and Policies: Anticipated changes in employment law will require updates to contracts, handbooks, and policies. CMD Recruitment can help businesses make these changes once the specifics are confirmed.
Dan concluded: “The October budget and proposed legislative changes present a complex mix of challenges for businesses, particularly in the areas of hiring and workforce management. Rising operational costs, stricter employment laws, and greater compliance requirements will require businesses to adapt rapidly.
“By considering these scenarios and taking proactive measures now, businesses can navigate the challenges and opportunities the upcoming budget and legal reforms present. At CMD Recruitment, we are ready to support you in staying ahead of these changes.”
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