A budget of wins and misses

After a turbulent 2020, the 2021 Spring Budget was marketed as the Budget that would protect jobs and livelihoods. Indeed, it was anticipated that the Chancellor would extend the COVID -19 business support packages and lay the foundation for future economic prosperity – this is certainly what the REC lobbied for. So how did the Chancellor deliver for recruiters?

COVID-19 support packages

The Government is extending the CJRS for a further five months to the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked. There will be no employer contributions beyond National Insurance contributions (NICs) and pensions required in April, May, and June. From July, the Government will introduce an employer contribution of 10% in July, and 20% in August and September.

Within the announcement, there was also mention of a new £100 million Taxpayer Protection Taskforce to combat fraud within COVID-19 support packages, including the CJRS and SEISS, representing one of the largest responses to a fraud risk by HMRC. The REC will be meeting with HMRC in the coming days to gather further details.

The extension of furlough plus the business rates and VAT deferral scheme is welcome news and a big win for the REC and its members, but more is needed. After almost a year of battling cashflow pressures due to feast and famine demand cycles and tough trading conditions, many recruitment businesses simply cannot afford to furlough their workers. We would still advocate a relief package for suppliers.

Self-Employment Income Support Scheme (SEISS)

The Government confirmed that eligible self-employed workers will be able to receive two further grants. The fourth SEISS grant will be worth 80% of three months’ average trading profits, paid out in a single instalment and capped at £7,500 in total. The grant will cover the period February to April and can be claimed from late April. Meanwhile the value of the fifth and final grant will be determined by a turnover test.

These grants will go some way in supporting the self-employed, however, they offer nothing to the 1 million+ people who have fallen through the cracks when it comes to Coronavirus support. Amongst this group are directors of limited companies who are ineligible for SEISS. Executive search firms (head-hunters) are often run by company directors. These businesses have been badly affected, given the 80% drop in demand for permanent staff at the start of the pandemic. The sharp fall in vacancies left them with no incoming revenue and continuous outgoing costs such as rent on office space. It is a failure on the part of Government to not offer them any income protection during this time.

Skills and training

The Government is introducing a £7 million fund from July 2021 to help employers in England set up and expand apprenticeships. Under the scheme, apprentices will be able to work across multiple projects with different employers. While it’s refreshing to see some attempt by Government to improve the levy, it still signals an over-reliance on apprenticeships to fix the country’s skills gaps. Employers have told us that what they need now is access to funding for short-term courses to solve their immediate skills needs. A broad, flexible training levy that could be used on other accredited courses would be more useful for companies and workers, and more effective at filling the skills gaps that exist in our economy. Government has missed yet another opportunity to reform the apprenticeship levy, which so far has been a failure in every respect.

Tax

As feared the Government revealed that to balance the spending, they will not be cutting business taxes. As previously announced, and legislated for in February 2021, in 2021-22 National Insurance contributions (NICs) thresholds will rise with consumer price inflation (CPI). Meanwhile Corporation tax will increase from April 2023 to 25% on profits over £250,000. Lastly while there was no mention of the words IR35 or off-payroll working tax, in the Budget speech or in the Red book, but a further delay is not expected. The Finance Act will be published on 15 March, the REC has been consulting with HMRC on the final amendments.

Next steps

What we really want now is for the Chancellor to work with the REC and the whole industry on a longer term vision for his Plan for Jobs.  We set out our key recommendations in Recruitment and recovery – www.rec.uk.com/recruitmentrecovery