Reflecting on 2024: Key Changes in Employment Legislation and Preparing for 2025

Businesses have had to navigate significant updates in employment law and tax regulations. From the critical Off-Payroll Off-Set changes to the broader implications of the Employment Rights Bill and shifts in compliance expectations, this year marked a turning point. As we move into 2025, companies must adapt and prepare for the evolving regulatory landscape. 

Off-Payroll: Off-Set (April 2024) 

One of the most notable changes in 2024 was the update to off-payroll working rules. Previously, if HMRC found a hirer had incorrectly determined an off-payroll status as one of self-employment, the deemed employer would be liable for the income tax and National Insurance Contributions (NICs) that should have been deducted from the fee paid to the intermediary, irrespective of what tax and NICs the intermediary may have already paid to HMRC on that amount. This created significant financial challenges: 

• Double Taxation: HMRC collected tax twice on the same income—first from the intermediary, and again from the deemed employer. 

• Full Cost on Employers: Employers bore the full PAYE liability despite taxes already being paid elsewhere. 

From 6 April 2024, this changed. Liability remains the deemed employers responsibility, but where HMRC is satisfied that the conditions for an offset have been met, the liability of the deemed employer will be offset to take account of Income Tax and NICs paid on the income by the intermediary. This is a welcomes development and it significantly reduces the perceived tax risk associated with engaging intermediaries in outside IR35 roles.  Practical Steps for Businesses:  If a fee payer (such as a recruitment agency) is involved in the supply chain, end clients must collect specific information about contractors: 

• Worker’s full name or National Insurance Number (NINO) 

• Intermediary’s or partnership’s name 

• Company Reference Number (CRN) or VAT Registration Number (VRN), where applicable 

Reasonable Care Remains Crucial: While the offset rules have enhanced the IR35 legislation, end-hirers are still required to exercise reasonable care when assessing contracts for IR35 compliance. HMRC’s compliance activity continues to focus on this, and where reasonable care is demonstrated, enquiries are often closed. 

Employment Rights Bill: Focus on Worker Protections 

The Employment Rights Bill introduced a series of changes aimed at protecting workers and ensuring fair treatment, even for temporary or zero-hour contract workers. Key highlights include:

1.Day 1 Rights

Workers now have access to immediate rights, including: 

• Paternity, parental, and bereavement leave 

• Sick pay 

• Protection from unfair dismissal 

This marks a shift toward a more compassionate framework that requires businesses to educate themselves on worker rights, especially for temporary or contingent labour.

2.New Anti-Harassment Obligations

Driven by the MeToo movement, businesses now have a proactive duty to take reasonable steps to prevent sexual harassment in the workplace.

3. Fair Work Agency (FWA)

The new Fair Work Agency consolidates enforcement powers previously split between the GLAA (Gangmasters and Labour Abuse Authority) and the Director of Labour Market Enforcement. The FWA will: 

• Investigate and enforce employment rights, including holiday pay and sick pay 

• Address labour market abuses more effectively

4. Zero-Hour Workers

The Bill seeks to address “one-sided flexibility” in zero-hour contracts: 

• Right to guaranteed hours based on usual working patterns 

• Reasonable notice for shift changes or cancellations, with compensation implications 

Ongoing consultations will determine how these rights apply to agency workers, including questions about whether agencies or clients should offer guaranteed hours. 

Autumn Budget 2024: Financial Considerations 

The Autumn Budget introduced measures that will impact businesses and contractors in 2025: 

1.National Minimum Wage Increase: 

• From April 2025, the minimum wage for over-21s will rise from £11.44 to £12.21 per hour. 

• This increase will raise the entry-level assignment rate for umbrella companies to approximately £16.30 per hour. 

2. Employer’s NIC Threshold Reduction: 

• The secondary threshold for Employer’s NIC will fall from £9,100 p/a to £5,000 p/a. 

• Impact: Reduced take-home pay for umbrella company employees, leading to an increase in assignment rates. 

Practical Impact on Take-Home Pay: 

• Assignment rate £20/hour: Take-home pay reduction of £11/week (45p per hour rise in rates) 

• Assignment rate £40/hour: Take-home pay reduction of £13/week 

• Assignment rate £70/hour: Take-home pay reduction of £17/week 

Supply Chain Compliance: The regulation of the umbrella company market means agencies (or end clients) will bear the tax and NIC liabilities of non-compliant umbrella providers. Businesses must ensure their umbrella provider supply chains are compliant to mitigate risks. 

2025 Predictions: Key Trends to Watch 

1. Off-Payroll Offsets: The new offset rules have reduced the financial risk associated with incorrect outside IR35 determinations. This change cuts the risk to approximately 15% of the assignment rate. 

• Action Point: Ensure contractors working on outside IR35 roles manage their company filings and tax payments correctly. 

2. Reduction in Blanket Bans: Businesses and recruiters are becoming more open to managing IR35 correctly. Combined with the Employment Rights Bill and umbrella market regulation, companies may review the cost and risk of agency workers and umbrella solutions.  3. Market Shift Toward PSCs: With increasing compliance risks and commercial pressures, there may be a consolidation of the umbrella market and a shift back toward PSC (Personal Service Company) engagements.

HMRC Compliance Activity: Increased Scrutiny in 2025 

HMRC continues to intensify its compliance activity. Recent developments include: 

• Recruitment of 5,000 new compliance officers to tackle the tax gap 

• Increased focus on Statement of Work arrangements and verifying whether they constitute true contracted-out services 

• Requests for detailed contractor information from clients, such as: 

• Number of limited company contractors (inside and outside IR35) 

• Number of umbrella workers, sole traders, or agency workers 

• Total spend for off-payroll workers 

Supply Chain Responsibility: HMRC expects clients to understand and monitor their entire supply chain, clamping down on non-compliance at every level. 

Preparing for 2025 

Businesses have faced complex changes in employment and tax regulation. As we move into 2025, the focus will be on: 

• Navigating off-payroll offset rules 

• Adapting to the Employment Rights Bill and worker protections 

• Ensuring supply chain compliance to mitigate risks 

At Brookson Legal, we are here to help you stay compliant, informed, and prepared for the year ahead.   Get in touch with our expert team today to ensure your business thrives in 2025.