7 employment-related measures in the 2016 Spring Budget
Although the dust has yet to settle on the Chancellor George Osborne’s 2016 Spring Budget, with the First Secretary of State facing attacks from red frontbenchers and blue backbenchers alike, let’s try to squint through the still-billowing clouds (now mingling with those left by former Work and Pension Secretary Iain Duncan Smith’s hasty departure from the Cabinet) and try to make sense of the employment-related measures Mr Osborne intends to introduce.
Whilst the unpopularity of the Budget amongst his own party – along with Peer pressure from the House of Lords – means some of the Chancellor’s provisions are potentially subject to change, here are 7 of the (pencilled-in) measures relating to employment:
1. The National Living Wage
The National Living Wage (“NLW”) will be introduced from 1 April 2016 for workers aged 25 and older. Initially set at £7.20, the NLW will boost the income of low-paid workers, though critics point out that it will also mean that some low-skilled workers will be priced out of the labour market and unemployment (and the number of people claiming benefits) will increase as a result.
2. The National Minimum Wage
For those younger than 25, the National Minimum Wage (“NMW”) rates will also increase, by 3.7% for 21-24 year olds (from £6.70 to £6.95 per hour); 4.7% for 18-20 year olds (from £5.30 to £5.55 per hour); 3.4% for 16-17 year olds (from £3.87 to £4.00 per hour); and 3% for apprentices (from £3.30 to £3.40 per hour), whilst the accommodation offset will increase by 12.1% from £5.35 to £6 per day. From April 2017 the NLW and NMW will be aligned and amended annually.
3. The Personal Allowance
In an effort to move towards his commitment of raising the personal allowance to £12,500 by the end of the Parliament, Mr Osborne announced an increase in the personal allowance from £11,000 in 2016/17 to £11,500 in 2017/18, to enable all workers to keep more of the fruits of their labour.
4. The Higher Rate Threshold
Progressing in the direction of his end of Parliament commitment to raise the higher rate threshold to £50,000, this Budget saw the Chancellor increase the higher rate threshold by £2,000 to £45,000 in 2017/18, having previously increased the threshold for 2016/17 to £43,000, from £42,385 in 2014/15. This measure is also expected to stimulate the economy by enabling workers below this threshold to retain more of their earnings to invest, save or spend.
5. Employee Shareholder Status (ESS)
The above measures will enable low and middle income workers to earn more, and keep more of what they earn. However, the Mr Osborne has announced changes to Employee Shareholder Status (“ESS”) to limit the potential benefit to employees. ESS grants tax advantages to employee shareholders on shares awarded in exchange for relinquishing certain employment rights. But, effective from 17 March this year, this Budget has placed a cap of £100,000 on lifetime gains eligible for Capital Gains Tax (“CGT”) exemption.
6. Shared Parental Leave (SPL) and Shared Parental Pay (SPP)
Having introduced Shared Parental Leave (“SPL”) and Shared Parental Pay (“SPP”) last year, allowing parents of new-born or adopted children to share their entitlement to statutory leave and pay, the Government will begin a consultation next month on how to extend the scheme to working grandparents, by way of recognition of the extent to which many grandmothers and grandfathers have increasing childcare responsibilities, whilst retiring at a later age than in previous generations.
7. Termination Payments
Finally, from April 2018 employers will have to pay National Insurance (“NI”) contributions on termination payments above £30,000 which are already subject to income tax. This will prevent employers from structuring payments in such a way as to minimise their contributions. 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 NI contributions.