The 2024 Autumn budget, delivered by Chancellor Rachel Reeves, has sent ripples throughout the business world, and the recruitment industry is no exception.
While some measures present challenges, others present potential opportunities.
Let’s break down the key changes and how agencies can adapt and thrive in this new landscape:
Potential Challenges on the Horizon
- Increased Employer National Insurance Contributions: The rise in employer NICs from 13.8% to 15% from April 2025, coupled with the lowering of the secondary threshold to £5,000, will undoubtedly increase the cost of hiring for businesses. This is the biggest potential challenge for recruitment agencies as it could lead to some companies becoming more hesitant to recruit, potentially slowing down the market for agencies.
- Clampdown on Umbrella Companies: The government is increasing its efforts to combat tax avoidance within the temporary workforce. From 2026, agencies and end-clients will bear responsibility for PAYE deductions made by umbrella companies. This places a greater burden on agencies to ensure they only work with compliant providers, adding another layer of complexity to their operations.
Opportunities
- Investment in Skills and Training: The budget includes significant investment in further education and skills training via the new growth and skills levy. This could lead to a more skilled workforce in the long term, benefiting agencies by increasing the pool of qualified candidates.
- Focus on Key Sectors: Support for Research and Development in sectors like technology, healthcare and green energy could stimulate job growth. Agencies specialising in these sectors may see an increase in demand for their services.
- Increased Employment Allowance: The rise in the Employment Allowance to £10,500 from April 2025 could offer some relief for smaller recruitment agencies, helping to offset the increased NICs.
How Recruitment Agencies Can Adapt
- Embrace Compliance: With increased scrutiny on umbrella companies, agencies must prioritise compliance. This includes thoroughly vetting umbrella providers, ensuring they understand their responsibilities regarding PAYE deductions, and staying up-to-date on any legislative changes.
- Focus on Value: In a potentially tighter market, demonstrating value to clients becomes even more important. Agencies should focus on building their brand, delivering exceptional service and utilising data-driven recruitment strategies.
- Specialise and Diversify: Consider specialising in sectors with high growth potential, such as those highlighted in the budget. Diversifying service offerings to include temporary staffing or executive search, or outsourcing back office functionscan also open up new revenue streams and tighten your spending.
- Invest in Technology: Automation and AI can help agencies streamline processes, improve candidate sourcing and enhance communication. Investing in these technologies can improve efficiency and provide a competitive edge.
Looking Ahead
It’s early days but the 2024 autumn budget on the face of it, presents both challenges and opportunities.
By proactively adapting to the changing landscape, agencies can not only weather the storm but also position themselves for continued success.
The key lies in understanding the implications of the budget and focusing on delivering exceptional value to clients and candidates alike.
If you’re concerned about cashflow or want to free up funds to invest in your agency, then recruitment finance could help.
At New Millennia we work with start-up recruitment agencies and established SMEs, helping to improve cashflow and streamline processes.
For an informal chat, get in touch.
