How Does the Autumn Budget Announcement Impact the Temp Recruitment Industry?

The UK government’s October 2024 Budget announcement has introduced several changes likely to impact the temporary recruitment industry.

With rising employer costs, adjustments to compliance requirements, and sector-specific tax incentives, temp recruitment agencies must assess these developments carefully. This blog aims to clarify what temp recruitment agencies need to know, outlining potential challenges and strategies to remain efficient and compliant.

Given the swift pace of regulatory changes, staying informed and adapting quickly is more critical than ever for the industry.

One significant adjustment in the 2024 Budget is an increase in Employer National Insurance Contributions (NIC) by 1.2%. For temp recruitment agencies, this shift could lead to tighter margins, impacting profitability, especially when working with large volumes of temporary placements.

The government will also reduce a secondary threshold when contributions are due from £9,100 to £5,000. This increase will likely prompt some agencies to rethink their cost management strategies. However, employment allowance will rise from £5,000 to £10,500 to help small businesses with the employers NI rise.

The 2024 Budget includes tax reliefs that may benefit recruitment agencies, particularly in relation to technology investments and workforce training. The Annual Investment Allowance (AIA) £1m threshold remains unchanged, offering agencies the chance to invest in tools and resources for long-term growth. Agencies that invest in tools like PrimePRO’s recruitment software may also qualify for incentives on technology expenditure, further reducing operational costs.

Regarding Corporation Tax, the main rate will remain at 25% for the duration of the parliament. Additionally, the Corporation Tax Small Profits Rate and marginal relief will be maintained at their current rate and thresholds.

The healthcare and education sectors have received significant attention in this Budget, resulting in funding increases that are likely to create more demand for temporary staff in these areas.

Healthcare:

• An additional £22.6 billion of resource spending for the day-to-day health budget for this year and next.
• An additional £3.1 billion increase to the capital investment budget for the NHS.
• Local government will receive £1.3 billion in additional grant funding for essential services, including £600 million for social care.

Education:

• Reeves pledges £1.4bn for ‘crumbling’ classrooms to improve infrastructure.
• An additional £1.8bn will go towards expanding government-funded childcare.
• Increased funding will support the expansion of free childcare hours and breakfast clubs in primary schools, helping ensure equitable access to educational resources.
• Protecting education is a priority, with Reeves emphasising that children “should not suffer” due to fiscal challenges.

In the construction and hospitality industries, fluctuating budget allocations may lead to varied recruitment demand.

Construction:

• Rachel Reeves has confirmed a top-up for the Affordable Homes Programme (AHP), including a £3bn in guarantees to support small house builders.
• An additional £500m in new funding aims to build up to 5,000 affordable social homes.

Hospitality:

• A 40% relief package would be provided for the hotel, restaurant, and hospitality industries, up to a cap of £110,000 per business, although the rate of relief has been reduced from 75%.

Industrial:

• Chancellor Reeves announced more details about the National Wealth Fund, designed to catalyse investment to drive the government’s modern industrial strategy by targeting sectors with the “biggest growth potential.”
• This strategy includes nearly £1bn for the aerospace sector, over £2bn for the automotive sector, and up to £520m for a new Life Sciences Innovative Manufacturing Fund.
• There will also be £3.4bn for a warm homes plan to increase energy efficiency in homes.
• Funding details for GB Energy are set to be revealed next year, with an overall expected government expenditure of £100bn in capital spending over the next five years.

While construction could see a moderate increase in temporary roles driven by infrastructure projects such as the commitment to the cladding remediation, whereas hospitality may face pressure as they have less relief and consumer spending fluctuates. The industrial sector though, may experience significant growth based on investment.

To remain competitive and adaptable in a changing economic landscape, temp agencies should consider strategic adjustments that promote efficiency and reduce operational strain.

Here are some key strategies:

In a climate of rising costs, operational efficiency is paramount. By automating core processes, agencies can reduce time spent on repetitive tasks, allowing their teams to focus on high-value activities like client management and candidate engagement.

PrimePRO’s AI-powered automation simplifies tasks such as candidate onboarding, compliance verification, and payroll processing. By using PrimePRO’s tools, agencies can handle increased workloads with fewer resources, maintaining service quality even when margins are tight.

With heightened compliance requirements, staying compliant can become resource-intensive. Temp recruitment agencies must manage payroll, timesheets, and employee records carefully to ensure adherence to government standards.

PrimePRO offers comprehensive compliance tools, allowing agencies to track and manage changing requirements effectively. From automatic updates on minimum wage adjustments to integrated payroll and HMRC-compliant document generation, PrimePRO ensures agencies remain compliant while managing costs.

The 2024 October Budget Announcement presents both challenges and opportunities for the temp recruitment industry. Increased NIC, minimum wage adjustments, and changing tax incentives mean agencies must adopt agile approaches to stay competitive.

By using technology like PrimePRO, temp recruitment agencies can streamline operations, remain compliant, and reduce administrative burdens.

Interested in seeing how PrimePRO can transform your agency’s approach to compliance, payroll, and recruitment? Book a demo with PrimePRO today and experience the next generation of temp recruitment software.