BT is facing additional costs of around £100 million following last week’s Budget announcement by the chancellor.
The telecoms company said the financial burden is the result of the minimum wage increase and changes to employers’ national insurance (NI).
Its chief executive, Allison Kirkby, revealed the firm would have to offset the extra costs by raising its prices and using artificial intelligence to boost productivity.
She attributed 70-75% of the increase to the employers’ NI contribution changes, with the rest being due to the 6.7% hike in the national living wage.
Budget costs for employers
Budget 2024: Employers’ national insurance up to 15%
BT also admitted it had slashed another 2,000 jobs as part of a long-term plan to reduce costs. Overall, it plans to cut up to 55,000 roles globally by 2030.
The move comes as the firm reported a 10% decline in its pre-tax profits, which fell to £967m for the six months to 30 September, and a 3% drop in revenue to £10.1bn.
Rachel Reeves said from next April, employers’ NI contributions would increase by 1.2 percentage points to 15%. She also reduced the level at which employers start paying NI for staff from £9,100 to £5,000.
Matthew Newnham, employment partner at law firm Birketts, warned employers to take care when tackling the extra costs. He said: “Many employers are already taking action to mitigate the effects of the budget and might already be considering reducing headcount. Employment tribunals generally expect redundancies to be a ‘last resort’ for employers, so before taking that step, employers should carefully consider what other cost savings can be made.
“This might include, for example, delaying annual pay reviews or introducing a temporary recruitment freeze. Making contractual changes to employment terms and conditions to reduce costs is usually more complicated and requires careful advance planning.”
He stressed that if redundancies are the only option available, employers should make sure they follow a proper consultation process with affected employees, which may include collective consultation if proposing 20 or more redundancies.
Newnham added: “This can take a while to achieve, so preparing early is essential to avoid the potentially costly penalties of getting it wrong.”
At the time of the budget announcement, Recruitment and Employment Confederation (REC) said the mix of tax rises and other costs imposed on firms by the government will make it harder for businesses to deliver growth.
Commenting on BT’s situation, Kate Shoesmith, deputy chief executive of the REC, said: “We agree with concerns about NI rises expressed by BT which are an example of widely held concerns that it will push up costs for employers and make it harder to create jobs in sectors that are already under strain. The tax raises in the Budget make life harder for business in an already tough trading environment.”
Latest HR job opportunities on Personnel Today
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Browse more human resources jobs
