CMD Recruitment Forecasts the Impact of the October Budget on UK Businesses

Businesses need to brace themselves for several potential economic shifts ahead of the October budget, which could have significant implications for recruitment, workforce planning, and broader operations.

CMD Recruitment has been monitoring the upcoming budget and proposed legislative changes closely to ensure they can guide businesses through these developments.

While these potential changes may bring challenges, they also offer opportunities for businesses prepared to adapt.

One key concern for businesses is the possibility of increased taxation. The government may look to raise revenue through higher National Insurance contributions and Corporation Tax, putting additional pressure on businesses’ payrolls and overall operational costs.

For instance, a 2% rise in National Insurance contributions could add approximately £1,000 a year to the cost of employing a full-time worker.

These rising costs may push businesses to be more selective with their hiring decisions, prioritising candidates who provide a strong return on investment and avoiding roles that don’t justify the increased expenses.

In addition to potential tax hikes, the government is also considering several employment law reforms that could impact hiring, dismissals, and workforce management practices.

Dan Barfoot, Operations Manager at CMD Recruitment, stated: “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.”

Another possible change could involve alterations to Statutory Sick Pay (SSP), with SSP being provided from the first day of employment, along with an increase in the SSP rate.

If the lower earnings limit is removed, all employees would be entitled to sick pay, regardless of their earnings. This could further strain businesses financially, especially if an employee’s absence extends over several weeks.

Recruitment is already becoming increasingly challenging, and these anticipated budgetary and legal reforms are likely to add further complexity.

Dan added: “Businesses will face rising costs related to taxation, wages, and employee benefits. For example, a 2% increase in National Insurance contributions, coupled 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 Changes: What Businesses Can Do

Given the scale of these potential changes, CMD Recruitment recommends businesses start preparing now to reduce any negative impacts. Some key actions include:

• Review Current Employees: For staff with less than two years of service, now is the time to assess performance and make necessary adjustments before new unfair dismissal protections come into effect.
• Adjust Budgets: Plan ahead for the likely increases in the National Minimum Wage, Statutory Sick Pay, and National Insurance contributions. These changes will directly affect financial planning for 2025 and beyond.
• Improve Recruitment Processes: With recruitment becoming more difficult, it is crucial to streamline your hiring practices. Focus on clear job descriptions, probationary goals, and pre-employment screenings to ensure the right candidates are selected.
• Update Contracts and Policies: The anticipated employment law changes will necessitate updates to contracts, policies, and handbooks. Once finalised, CMD Recruitment can assist businesses with these revisions.

Dan concluded: “The October budget and proposed legislative changes present a complex mix of challenges for businesses, particularly regarding hiring and workforce management. Rising operational costs, stricter employment laws, and increased compliance requirements will require businesses to adapt quickly.

“By considering these potential scenarios and taking proactive steps now, businesses can better navigate the challenges and opportunities presented by the upcoming budget and legal reforms. At CMD Recruitment, we are ready to help you stay ahead of the curve.”

For more information on CMD Recruitment’s services and predictions, click here.