Following the publication of this year’s budget on 16 March 2016, we now know that we will all be paying that little bit extra for a fizzy drink. Whilst that may have an impact on staff morale, what other, non-sugar related, parts of the 2016 budget will have the greatest impact on employers? Here are some of the key issues:
Further to the apprenticeship levy (or as some employers have viewed it the “new payroll tax”) introduced as part of the 2015 Autumn Statement, it was announced that employers will receive a 10% top-up to their monthly levy contributions in England as soon as the scheme begins on 7 April 2017, available for employers to spend on apprenticeship training.
The apprenticeship levy will be 0.5% of a company’s National Insurance pay bill for a tax year less an annual allowance of £15,000, meaning companies with a payroll of £3 million and above will be affected. Whilst not every employer will pay the levy, all employers will be able to access any unused funds. This is a case of “use it or lose it” and by this announcement the Government is encouraging employers to “use it”.
To make the most of the scheme, employers should consider which roles are or could be suitable for apprentices and look at getting those schemes accredited or outsourced to an accredited scheme. The apprenticeships do not have to be entry-level only – training on promotion to managerial roles may qualify.
The Government has announced the intention to close the loop holes in remuneration structures that limit the NI that would normally be due from termination payments, with regulations tightening from April 2018.
The first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee NICs. However with the introduction of the Finance Bill 2017 and a new National Insurance Contributions Bill, payments in lieu of notice and certain damages payments are likely to be taxed as earnings.
More information on the Government’s plans should emerge over the summer months.
The Government has expressed concern about the growth of salary sacrifice schemes and are to consider limiting the range of benefits that attract income tax and NIC advantages. The Government has confirmed however, that the pension saving, childcare and health-related benefits such as Cycle to Work will continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements.
Employment allowance and illegal workers
Since the introduction of the employment allowance in April 2014, businesses that pay Class 1 NICs on their employees’ earnings have been able to use an employment allowance that can cut up to £2,000 a year off their National Insurance bill. It was announced that this is set to rise to £3,000 from April this year.
Sticking to the topic of the employment allowance, as the Government looks to increase the deterrent for employing illegal workers, it was announced that employers subject to a civil penalty for employing illegal workers will be denied the allowance for a period of one year. This will apply from the tax year 2017 to 2018; with the exclusions coming into force from 2018 to 2019.
Extension of shared parental leave and pay to grandparents
Consultation on the Government’s plan to introduce shared parental leave and pay to working grandparents will commence in May 2016. The Government has previously stated that it aims to implement the policy by 2018. The consultation will look at ways to streamline the system for example simplifying the eligibility requirements and notification system and exploring the use of digital technology.
Even though the policy won’t be implemented until 2018, organisations should examine their current policies and consider the impact of the new legislation. This is especially important, as a failure to extend enhanced SPL pay to grandparents, if it is offered to parents, could be discriminatory.
Read our latest article on the impact of the apprenticeship levy