The Budget 2016 – What It Means for Employers
The Budget 2016, delivered by Chancellor George Osborne last month included several points of interest for employers. Here, we take a look at the most significant announcements.
The Government understands that employers are often confused about the treatment of termination payments for tax purposes leading to both intentional and unintentional manipulation of the law. Current rules on termination payments, which can include both settlement agreements and redundancy payments, mean that whilst the first £30,000 of these payments is tax free, anything above that amount is subject to tax. It was announced in the Budget 2016 that any money in excess of this amount will, from April 2018, attract national insurance contributions.
Salary Sacrifice Schemes
A limit on the continued use of salary sacrifice schemes is to be considered by the Government.
With these schemes, the employee agrees to ‘sacrifice’ some of their normal pay and convert the amount sacrificed into a non-cash benefit. Because of the reduced tax liability on this sum, it has a greater end value to the employee.
The Government is concerned at the growth of these schemes – a 30% increase since 2010 – and will consider imposing a restriction on their use. However, it has been confirmed that sacrifice in relation to childcare vouchers, pensions and health related benefits will be allowed to continue, meaning that employers may still use these as part of their benefits package to aid employee retention.
Apprenticeship Levy Update
It is already known that large employers – those with an annual wage bill of £3 million or more – will be required to pay an apprenticeship levy from April 2017. The system will require affected employers to pay 0.5% of their annual wage bill into an account set up for them, which they can then draw on to pay for off the job training for apprentices they employ.
The Chancellor announced that the Government will itself add an extra 10% of each employer’s levy payments into their levy accounts. This will apply to employers in England only. Although small employers will not have to pay the levy, the Government has stated that if an employer’s fund remains unused, it will be made available to other employers, which could include small employers who employ apprentices.
Shared Parental Leave and Grandparents
The Budget 2016 contained the next steps in the process of extending shared parental leave to include grandparents within scope. Shared parental leave was introduced in 2015 giving parents the opportunity to take flexible leave when a child is born or adopted, rather than stick to the traditional maternity leave and paternity leave entitlements. Currently, a mother can only share her leave with one other person who must be either the child’s father, the mother’s husband/civil partner, or her partner.
In May 2016, a public consultation will begin on proposals to add the child’s grandparent – who must still be in work – to that list. Government statistics show that around 2 million grandparents have given up work in order to be able to help their children with looking after their own children. This may mean that more older employees remain in work for longer because they will be able to more easily meet both their work and caring responsibilities.