The recently announced October 2024 Autumn Budget introduces a range of fiscal measures poised to impact the recruitment landscape, labour market, and businesses in the UK.
With an eye on fiscal responsibility and growth stimulation, the government has introduced new tax measures, investment incentives, and labour market reforms that will shape recruitment strategies and business decisions across industries.
Here’s a breakdown of the budget highlights and what they mean for employers and recruitment agencies.
1. Tax Changes and Their Impact on Hiring Costs
One of the more significant changes in the 2024 budget is the increase in employer National Insurance Contributions (NIC), which will rise from 13.8% to 15.8% starting April 2025. This tax increase will raise the cost of employment, likely leading many businesses to reconsider their hiring strategies and employee mix.
Hiring Decisions: The heightened NIC rates are expected to prompt businesses to be more selective with new hires, possibly leading to a slower pace of growth in the job market. Companies may adopt a cautious hiring approach, particularly in labour-intensive industries where the financial impact will be most keenly felt.
Flexibility and Cost Management: In response to these rising costs, businesses may opt for a flexible workforce structure, balancing full-time employees, freelancers, and technology solutions. We may also see an increased adoption of automation and AI, especially in roles where digital tools can handle repetitive tasks.
The abolition of the non-dom tax status, replaced by a temporary resident tax for those residing in the UK for under five years, could also affect the flow of overseas talent. This shift may encourage a different demographic of foreign workers to seek UK opportunities and could influence the diversity of the UK labour pool.
2. Labour Market and Employment Shifts
A centrepiece of the budget is the government’s introduction of the "British Jobs for British Workers" plan, mandating that large companies advertise roles locally before recruiting overseas talent. While well-intentioned in its aim to prioritise local talent, this regulation will have implications for recruitment processes, particularly for companies relying on international candidates to fill highly specialised roles.
Recruitment Strategies: This plan could lengthen hiring timelines, as companies may need to undergo additional steps before reaching the right candidates. Recruitment agencies may play an even more vital role, helping companies navigate these requirements efficiently while ensuring talent needs are met without delay.
Wage Increases: The national living wage will rise from £10.42 to £11.44 per hour in April 2025. While a boon for workers, this increase will further add to business costs, particularly in sectors reliant on minimum wage employees. Companies may face pressures to optimise operations and staffing structures, favouring efficiency and productivity.
3. Business Support and Investment Initiatives
The Autumn Budget introduces several initiatives to boost business investment and support economic growth:
Growth Guarantee Scheme: With the new "growth guarantee scheme" replacing the former recovery loan scheme, £3 billion in guarantees will support small and medium-sized businesses. This funding will provide critical support for SMEs, enabling them to expand and stabilise in a complex economic environment.
Permanent Full Expensing for Business Investment: The permanent implementation of full expensing for business investments could encourage UK businesses to upgrade equipment, technology, and infrastructure. This measure is expected to drive productivity gains, helping companies remain competitive in an evolving global market.
Strategic Investment Fund: The creation of a £4.5 billion fund for investment in strategic sectors—green industries, life sciences, and advanced technology—signals the government’s commitment to fostering innovation and job creation in these high-growth areas. For the recruitment sector, this is a promising indicator of job creation in specialised fields, potentially increasing demand for talent with technical and scientific skills.
4. Economic Outlook and Market Expectations
The Office for Budget Responsibility (OBR) projects a gradual improvement in the economy, with GDP growth expected to increase from 0.7% in 2024 to 2% by 2026. Inflation is anticipated to decrease to 2.8% by the end of 2024 and reach the 2% target in 2025. These projections paint a cautiously optimistic picture, with controlled inflation likely to stabilise business costs and consumer demand over the medium term.
For UK businesses, the budget strikes a balance between promoting fiscal discipline and enabling growth through strategic incentives. While some changes, like the NIC hike, present cost challenges, others—such as full expensing and industry-targeted funds—offer avenues for expansion and innovation.
5. Implications for the Recruitment Sector
Recruitment agencies play a pivotal role in helping businesses navigate these changes. As companies reassess hiring plans and explore flexible workforce options, agencies will be essential partners in sourcing talent, meeting regulatory requirements, and adapting recruitment strategies to align with new economic realities.
Automation and Digital Transformation: The push towards automation may open up new sectors and skills within recruitment, where agencies can support clients in sourcing talent experienced with AI tools and digital systems.
Advisory and Consulting Roles: With new labour regulations, especially the “British Jobs for British Workers” rule, agencies can provide invaluable advisory support to ensure compliance and optimise recruitment processes under the new guidelines.
Strategic Industry Focus: The strategic funds for green industries and technology sectors will likely create demand for niche skills. Recruitment agencies with expertise in these fields will be well-positioned to help companies in these sectors scale rapidly and effectively.
The 2024 Autumn Budget brings fresh challenges and opportunities, especially in workforce planning and hiring strategies. As businesses adapt to these changes, careful planning and a proactive approach to talent sourcing will be key to maintaining growth and stability.
Eligo Recruitment can help you navigate this evolving landscape with a tailored recruitment strategy, industry insights, and access to top talent across sectors. If you’re looking to adapt your hiring approach, contact us or submit a vacancy today to find the right fit for your team.
Sources:
https://www.theguardian.com/uk-news/2024/oct/30/autumn-2024-budget-tax-changes-spending-rachel-reeves
https://www.pushgroup.co.uk/blog/autumn-budget-2024-impact-on-employer-costs-and-the-uk-job-market
https://www.hiringlab.org/uk/blog/2024/10/25/october-2024-uk-labour-market-update/
https://www.hrgrapevine.com/content/article/2024-10-29-autumn-budget-2024?source=newsletter&utm_source=template-pardot-2304-v5.1&utm_medium=email&utm_campaign=hr-30-10-24&utm_content=news&utm_term=Live+Updates