Employment implications of the 2016 Budget
In last month’s Budget, the Chancellor announced several changes which are of relevance to HR and employment. In particular:
- From April 2018, employers will be required to pay national insurance contributions on payments over £30,000. For employees earning over £770 per week (at present, although this figure may increase by then), the employer national insurance contributions currently stand at 13.8%: a substantial increase for employers.
- All payments in lieu of notice and certain damages payments will be taxed as earnings from April 2018.
- The government is promising a consultation on how to implement the extension of shared parental leave to working grandparents in May 2016, and also will be asking for ways in which the current eligibility criteria and notification processes can be simplified.
- The government is concerned about the growth of salary sacrifice schemes (over 30% increase in requests for clearance for such schemes from employers to HMRC since 2010), and the government is considering limiting the range of benefits that can be supplied with income tax and national insurance contribution advantages under such schemes. However, it intends that pensions, childcare and health-related benefits eg Cycle to Work should still be covered. There’s no promise of a consultation to follow.
- A lifetime limit of £100,000 has been introduced on gains exempt from capital gains tax (CGT), which will affect employee shareholders who sell their shares if they have reached the lifetime limit (previously, the entire gain from the sale of those shares would be CGT-free).
- The government intends that under a new apprenticeship levy from April 2017, employers will receive a government payment equal to 10% of their monthly apprenticeship levy contributions that will be available for them to spend on apprenticeship training.
- From April 2017, employers will be denied the NICs employment allowance for a period of one year if they are subject to a civil penalty for employing illegal workers.
The National Living Wage
From 1 April employers are now required to pay workers aged 25 and over the national living wage which is £7.20 per hour (NLW). This will be a strict legal requirement on employers with potentially heavy penalties for failures to comply. To ensure compliance, employers should, if they have not already done so, identify which of their workforce will be affected, that payroll systems are adapted and any other necessary measures carried out to meet with these new requirements.
One side effect which should be considered is where employers operate a salary sacrifice arrangement. This is where an employee agrees to ‘give up’ part of their salary in exchange for a non cash benefit, such as childcare vouchers or a pension contribution. Current legal requirements mean that a salary sacrifice arrangement cannot operate to reduce an employee’s cash earnings below any National Minimum Wage (NMW) they may be entitled to, and this will apply equally in relation to the NLW. Many employers currently operate such arrangements with this in mind – e.g. providing that employees can only participate in salary sacrifice to the extent that it would not reduce their earnings to below the NMW (if applicable to them).
By way of a reminder, the current standard basic rate for payment of the NMW for workers aged 21-24 inclusive is £6.70 per hour. Young workers aged between 18 and 20 are entitled to the NMWat the lower rate of £5.30 (Development rate), those aged 16 and 17 are entitled to a rate of £3.87 (Young Workers rate) and apprentices aged under 19, or aged 19 or over and in the first year of their apprenticeship, to £3.30 (Apprentice rate). These NMW rates will rise in October this year.
BIS has recently issued a booklet on Calculating the Minimum Wage which covers how to calculate the minimum wage, what counts as pay, what hours needs to be counted, and how to enforce the national minimum wage.
Government response to recommendations made by the EHRC on Pregnancy and Maternity related discrimination and disadvantage in the workplace
BIS and EHRC jointly commissioned research into pregnancy and maternity-related discrimination. This was the largest research project of its kind undertaken in Great Britain, drawing on the experiences of more than 3,000 mothers and more than 3,000 employers. This was born out of concerns that employers do not always comply with the law and that pregnant women and women taking maternity related leave may be disadvantaged in the workplace, sometimes amounting to discrimination. Following interim findings and subsequent recommendations the Government has now published its response . No time scales are given for any of the actions the Government proposes to take.
The Government accepts many of the EHRC’s recommendations including:
- working with EHRC and business leaders (mentioning the gender pay gap reporting measures),
- raising employers’ awareness or rights of and responsibilities to pregnant women and legal obligations
- improving access to information and advice for both employers and employees
- ensuring HSE reviews current health & safety guidance
- track mothers’ experience of their treatment in the workplace, and for Acas to consider monitoring and publishing the number and outcome of EC cases that involve pregnancy or maternity claims.
The Government did not accept EHRC recommendations for improving access to justice which included making changes to the ET fee system (as a review is underway) or increasing the time to bring a pregnancy or maternity discrimination claim from 3 to 6 months.
Acas has also now issued its response to EHRC research on pregnancy and maternity discrimination and has launched a series of equality guides to help employers and managers identify, tackle and prevent discrimination in the workplace. Their guidance on pregnancy and maternity discrimination is available here. Acas is also working with the EHRC on a new e-learning course.
Shared grandparental leave update
At the last Conservative party conference, George Osborne announced plans to extend shared parental leave to grandparents from 2018, allowing mothers to share maternity leave with one nominated working grandparent. He stated that shared grandparental leave would help families to keep childcare costs down, with grandparents playing a central role in caring for their grandchildren. In the Budget on 16 March, George Osborne affirmed the Government’s commitment. He said the first consultation on the extension of shared parental leave to grandparents will be launched in May.