National living wage increased

The wait for the much-anticipated Autumn budget is over. Millions are to pay more tax as the Chancellor cuts top-rate threshold in order to plug “black holes”. While saying he “tried to be fair”, disposable incomes are set to fall by 7.1% in real-term numbers – which equates to the lowest levels since records began in the mid-fifties.

Chancellor Jeremy Hunt declared he is increasing the national living wage by 9.7% next year, from £9.50 an hour for over-23s to £10.42. This represents an annual pay rise worth over £1,600 pounds to a full-time worker.

But what do the announcements mean for employers? Will businesses face backlash if they’re unable to pay the living wage? The u-turns and amendments could dramatically affect the contractor workforce.

Alexandra Farmer, Head of Team and Solicitor at  WorkNest commented: “With the rise in the National Living Wage mentioned in the budget, I expect a number of businesses will assess their workforce. Do they need all the employees they have? Can they make efficiencies to allow them to reduce the overall headcount? If so, we could be looking at an increase in redundancies over the next few months. It’s likely businesses will want these completed ahead of the rise in April to limit costs (i.e. redundancy payments and notice payments would otherwise be calculated using the higher rate of pay once it comes into effect).”

Unfortunately, it isn’t all good news for everyone.

Matt Fryer, MD of Brookson Group, a People2.0 Company commented: “This Autumn Statement and last month’s reversal of the measures announced in the Growth Plan mean that everyone is paying more tax, but this is especially true of contractors and the self-employed. Due to the structure of their businesses, independent contractors are particularly hit by today’s cut to dividend allowances and the previously announced increase in corporation tax rates.

“This is short-sighted. The economy needs flexible talent to support growth, including the infrastructure and energy independence projects that the Chancellor has prioritised. Contractors are available to work as and when their skills are required and the personal risks associated with this flexibility should be reflected in the tax system.

“Some may decide to seek permanent employment as a result of this budget, but contracting is not just about the money; it is a flexible lifestyle choice. If the Government is not going to incentivise the flexible workforce, businesses need to consider what else they can do to continue to make contracting an attractive option. This might include access to improved services or benefits, in compliance with the off-payroll working rules.”