UK Employment Changes
04 November 2024UK Budget
The UK Government’s budget, the first budget by a Labour Government for 14 years, has hit employers quite hard.
From April 2025, employers’ social security contributions will increase by 1.2 percentage points to 15% - a change that could potentially hurt wages and hiring.
Also, the threshold at which businesses start paying social contributions on each workers' salary will reduce from £9,100 (NZD 19,800) per year to £5,000 (NZD 10,850).
The combined changes are expected to raise £25 billion per year by the end of the decade.
For the more affluent, the capital gains tax will rise on most assets, jumping to 18% from 10% at the lower rate, and to 24% from 20% for higher earners to raise £2.5 billion a year by 2030.
Wages
In August the Government announced wage increases for public sector employees ranging from 4.75% to 6.5%, which is well above the rate of inflation, at a cost of 9.4 billion pounds. Teachers got 6%, Police 4,75% and civil servants 5%. Despite these increases the unions are already threatening much larger increases will be needed early next year, so significant industrial action is expected.
From April 2025, the Minimum Wage for those workers over 21 years of age, known as the National Living Wage, will increase by 6.7% to £12.21 per hour (NZD 26.50). The NZ Living wage is already at NZD 27.80.
Employment Law Amendments
The UK has several new and upcoming employment law changes, including:
Protection from Unfair Dismissal
Employees will be protected from unfair dismissal from their first day of employment, ending the current 90 day trial periods.
Right to Flexible Working
Employees can request permanent changes to their contract from their first day of employment.
Statutory Sick Pay
Employees who earn over £123 per week (NZD 260 per week) and are off sick for more than four days in a row will be entitled to Statutory Sick Pay (SSP) of £116.75 (NZD 253) per week, from the fourth working day.
In 1983, the Conservative government passed legislation to introduce SSP, which replaced a social security benefit. Initially employers were responsible for paying SSP for the first eight weeks of illness, but this was extended to the current 28 weeks in 1985.
Employers may of course agree to pay more, but the average annual sick leave in the UK is just under 5 days. More than half of European countries provide less than 10 days per year, with many of the less affluent countries offering more. Bulgaria tops the list at 22 days per year.
Right to Disconnect
The government will introduce the "right to disconnect" to promote healthier working practices, which is similar to the new Australian provision.
Protection from Redundancy
The Protection from Redundancy (Pregnancy and Family Leave) Act 2023 extends protection from redundancy to pregnant employees and those who have recently returned from maternity, adoption, or shared parental leave.
From 6 April 2024 the redundancy protected period for pregnant employees or those taking maternity leave was extended to 18 months after the baby is born. Before this they were only protected while on maternity leave.
If an employee is declared redundant within 18 months of the date their baby is born, the employer must offer them a suitable alternative vacancy, if there is one.
Sexual Harassment
Employers will have a proactive duty to take "reasonable steps" to protect employees from sexual harassment.
Pay Gap Reporting
Employers with more than 250 employees will have to report on pay gaps.
Holiday Entitlement
For holiday years beginning on or after April 1, 2024, holiday entitlement for part-year and irregular hours workers can be calculated by taking 12.07% of the hours worked in the pay period.
The minimum annual holiday entitlement for full-time employees is 28 days, or 5.6 weeks of paid leave. Four weeks is paid at “normal” pay while the other 1.6 weeks is paid at “ordinary” pay.
Meanwhile in Europe
VW has announced it needs savings of around four billion euros (NZD 7.3 billion). To achieve that, VW is likely to close several factories in Germany - a first in the company's 87-year history. VW is also seeking a 10% pay cut for all remaining staff, with no salary increases in 2025 and 2026.
VW's powerful works council and union bosses have vowed to put up strong resistance against the plans and are instead claiming a 7% increase. But VW argues the cuts are necessary as it struggles with high production costs, a stuttering switch to electric vehicles and rising competition in key market, China.
Rival carmakers in Germany's flagship industry are facing similar headwinds, contributing to a wider downturn in Europe's largest economy.