The Chancellor of the Exchequer has today presented the first Budget of the new parliament and indeed the first Conservative budget since November 1996. With the REC’s Report on Jobs today reporting yet again that businesses are struggling to fill vacancies, the challenge for the Chancellor was to produce a Budget that meets the demands of the UK economy.
Here at the REC we watched intently for any changes or announcements affecting the recruitment industry or impact on the jobs market. Here’s what you need to know:
National Living Wage
The government will introduce a new National Living Wage (NLW) for workers aged 25 plus by introducing a new premium on top of the National Minimum Wage (NMW)
- The government will introduce a new National Living Wage (NLW) for workers aged 25 plus by introducing a new premium on top of the National Minimum Wage (NMW)
- From April 2016, the NLW will be £7.20 and the government have set a target of £9 by 2020.
- Further to this, the government has said the new remit for the Low Pay Commission is to ensure that the NLW is set at a sustainable rate and continues to take broader economic conditions and the growth in median earnings into account.
- In order to try to offset the cost of this on business, from April 2016 National Insurance Contribution (NICs) Employment Allowance will increase from £2000 to £3000 a year. The government suggests this will mean firms will be able to employ four workers full time on the new NLW without paying any NICs.
REC comment: It is important that pay rates should be set based on evidence and therefore we welcome the news that the Low Pay Commission will continue to act as an independent arbiter of what employers can afford to pay.
HMRC have published a new consultation on restricting the use of travel and subsistence by employment intermediaries
- As part of a drive to clampdown on tax avoidance, HMRC have published a new consultation on restricting the use of travel and subsistence by employment intermediaries, including personal service companies We have until 30th September to respond. The main proposal of the consultation is “to remove tax relief for ordinary commuting (in general, home-to-work travel and subsistence expenses) for workers who are: supplying personal services; engaged through an employment intermediary (including umbrella companies, certain employment businesses and personal service companies); and, subject to (or to the right of ) the supervision, direction or control”
- The Budget also makes reference to IR35 reform and states that it will engage on how to improve the effectiveness of existing legislation.
REC comment: We have already been contacted by HMRC who have confirmed we will be party to stakeholder discussions on IR35. We have long campaigned for action on travel and subsistence schemes to ensure that there is a level playing field for agencies and workers who play by the rules. We very much welcome this consultation and will be seeking REC member feedback shortly to inform our response.
Apprenticeships and skills
- In order to fund the government’s planned three million new apprenticeships, an ‘apprenticeship levy’ is to be introduced on all large firms.
We urge the government to fully consult with the business community before introducing such a levy
REC comment: While we support the idea of funding more apprenticeships to develop a skilled workforce, we are concerned that this may be yet another tax on businesses looking to lead the way on apprenticeships. We urge the government to fully consult with the business community before introducing such a levy.
- The Budget also announced a new ‘youth obligation’ from April 2017 for all 18-21 year olds who are not in work or education. The government will offer an intensive regime of support and after six months a young person would be expected to apply for an apprenticeship, traineeship, gain work-based skills or go to a mandatory work placement to get the skills they require for employment.
REC comment: Youth unemployment is still far too high and this is an area that the REC has campaigned on for some time. The ‘youth obligation’ scheme should also engage employers and recruiters if it is to best reflect the current jobs market.
- Further devolutions deals were announced for Sheffield and Liverpool City Regions, and for Leeds, West Yorkshire and partner authorities with significant additional powers and opportunities to take control of their own economic growth.
- Devolving powers to Greater Manchester will include a discussion of how central government and the city region might collaborate further on employment programmes. It will also include the continued support for Manchester’s Working Well programme and allowing for greater local flexibility in employment services. New Enterprise Zones will focus on ensuring all places in England benefit, including rural areas.
- There will be a new Jobcentre Plus Employment Advisor role in Birmingham working with schools and sixth-form colleges to improve young people’s understanding of the local labour market, the skills local employers want and routes into work.
We urge the government to establish a mechanism to review and rate Local Enterprise Partnerships (LEPs)
REC comment: Devolution is a priority for this government and we welcome policies that reflect local differences in the labour market. We urge the government to establish a mechanism to review and rate Local Enterprise Partnerships (LEPs) to incentivise them to become more business-led and growth-focused, and we’d want to see new regional employment programmes build on our existing REC/DWP Partnership Agreement.
You can read the Budget documents in full on the government website. If you are a member and you would like to discuss these developments with our policy team, please contact Philip.firstname.lastname@example.org