The Autumn Budget 2024 brings impactful changes for businesses across the UK. And small to medium-sized enterprises (SMEs) face unique challenges with the updated regulations.

The changes span across National Insurance Contributions, benefits reporting, hiring incentives, and sustainability measures. This means SMEs must adapt to remain compliant and cost-effective. HR consultants are uniquely positioned to guide SMEs through these transitions. By offering their expertise they simplify compliance, optimises workforce strategies, and promote long-term growth. Here’s a breakdown of the Budget’s key measures and a consolidated guide on how HR consultants can best support SMEs.

Key Budget Measures Impacting SMEs

1. Increased National Insurance Contributions (NICs)
The Budget includes an increase in employer NICs from 13.8% to 15%, effective April 2025, with the threshold for payments decreasing from £9,100 to £5,000. Consequently, this raises payroll costs, which can strain budgets and limit hiring flexibility for SMEs.

2. Expansion of Employment Allowance
To counterbalance the NICs increase, the Employment Allowance will increase from £5,000 to £10,500, with the removal of the £100,000 threshold making more SMEs eligible. This relief helps reduce NICs liabilities, freeing up funds for growth.

3. Mandatory Digital Reporting for Benefits in Kind
Starting April 2026, businesses will need to use payroll software to report and pay taxes on benefits in kind. This marks a push for greater digital compliance.

4. Veteran Employment NIC Relief
The Budget extends NIC relief for hiring veterans, exempting employer NICs for veterans’ first-year salaries up to £50,270. Therefore, offering incentives for SMEs to hire and support veterans.

5. Stricter Regulations on Employee Ownership and Benefit Trusts
New regulations focus on ensuring Employee Ownership Trusts (EOTs) and Employee Benefit Trusts (EBTs) are used for genuine employee ownership and benefits. Thus, they will impact SMEs that utilise these structures.

6. PAYE Responsibilities for Umbrella Companies
From April 2026, recruitment agencies and end-client businesses must handle PAYE for workers through umbrella companies. As a result this increases administrative responsibilities for SMEs that rely on temporary workers.

7. Vehicle Taxation Changes and Increased Company Car Tax (CCT)
The Budget reclassifies double cab pick-up trucks (DCPUs) as cars for tax purposes and introduces incremental CCT rate increases, particularly for zero-emission vehicles. These changes push businesses toward eco-friendly fleet options and compliance.

 

How HR Consultants Can Support SMEs Post-Budget

As SMEs navigate these Budget changes, HR consultants can play a vital role in helping SMEs

• to adapt;
• meet compliance requirements;
• and make strategic workforce adjustments.

Here’s a consolidated guide on how HR consultants can support SMEs:

1. Navigating Compliance and Digital Transformation

• Digital Payroll Transformation: HR consultants can help SMEs select and implement payroll software that complies with the new digital reporting requirements for benefits in kind. Thus, reducing the risk of non-compliance penalties and improves payroll efficiency.
• Benefits Compliance and Simplification: By auditing current benefits packages, consultants can help SMEs streamline offerings and simplify reporting. This ensures compliance and makes benefits more manageable and impactful for employees.

2. Budget Impact Analysis and Workforce Planning

• NICs and Employment Allowance: HR consultants can conduct a financial impact analysis of increased NICs and guide SMEs in claiming the expanded Employment Allowance to reduce NIC liabilities. This allows SMEs to reallocate savings toward key areas like training and development.
• Optimising Staffing Models: Consultants can assist in designing flexible staffing solutions to control payroll costs, such as evaluating part-time or contract roles that balance workload without the full cost of permanent employees.

3. Inclusive Hiring and Veteran Employment Strategies

• Leveraging Veteran NIC Relief: HR consultants can integrate veteran hiring into SMEs’ workforce strategies, benefiting from the NIC relief while adding valuable skills and diversity to the team.
• Talent Sourcing for Veterans: Consultants can help SMEs connect with veteran recruitment channels and create veteran-friendly onboarding processes, making the hiring and retention of veterans more accessible and effective.

4. Supporting Trust Compliance and Alternative Rewards

• Compliance Audits for EOTs and EBTs: HR consultants can review SMEs’ use of Employee Ownership and Benefit Trusts to ensure compliance with updated regulations. This protects SMEs from penalties and keeps trust benefits in line with government standards.
• Developing Alternative Reward Systems: If EOTs or EBTs become too restrictive, HR consultants can suggest alternative rewards like profit-sharing, bonuses, or performance-based incentives to maintain employee engagement.

5. Managing PAYE Responsibilities for Contingent Labour

• PAYE Compliance for Umbrella Companies: HR consultants can guide SMEs through the updated PAYE requirements for umbrella companies, helping to clarify tax obligations for temporary workers and reviewing contracts to align with new standards.
• Alternative Staffing Solutions: For SMEs heavily reliant on contingent labour, consultants can explore cost-effective alternatives, such as direct contracts or flexible staffing arrangements that maintain flexibility while reducing administrative responsibilities.

6. Encouraging Sustainability with Green Incentives

• Fleet and Vehicle Policy Adjustments: With the reclassification of certain vehicles and CCT increases, HR consultants can review vehicle policies and encourage SMEs to consider zero-emission or hybrid options, optimizing tax benefits while promoting environmental responsibility.
• Sustainable Benefits for Employees: HR consultants can help SMEs develop green benefits packages, such as incentives for electric vehicles, public transport allowances, or carpooling programs. This not only aligns with government incentives but also appeals to eco-conscious employees and customers.

7. Long-Term Cost Savings and Reinvestment

• Planning for Future CCT Increases: With incremental CCT rate hikes, HR consultants can guide SMEs on long-term strategies for fleet management, emphasising sustainability to avoid future tax burdens.
• Strategic Reinvestment: By identifying and implementing savings from NICs reliefs or reduced vehicle costs, HR consultants can support SMEs in reinvesting these funds into growth-driving areas like training, technology, or employee development programs.
  Building Strong Partnerships Between HR Consultants and SMEs

The Autumn Budget 2024 introduces both challenges and opportunities for SMEs. Through a proactive partnership with HR consultants, SMEs:

• can stay compliant;
• adapt their workforce strategies;
• and leverage available incentives to remain competitive.

By focusing on compliance, workforce optimisation, and sustainable practices, HR consultants help SMEs transform Budget-related challenges into avenues for growth and resilience. This collaboration prepares SMEs for regulatory demands and positions them for sustainable success in an evolving business landscape.

Author: Mary Asante | HRi