Reforms to 'off payroll' working in the private sector delayed until April 2020
Following the changes introduced to the IR35 regulations in the public sector last year, which leave public-sector employers to determine whether income tax and national insurance contributions should be applied to self-employed contractors working for them, it had been hotly anticipated that similar reforms would be introduced into the private sector from April 2019. However, perhaps taking on board widespread concerns that private sector businesses would be unprepared for such changes so soon, the Chancellor confirmed that reforms will be introduced, but only for large and medium sized organisations and their implementation will be delayed until April 2020.
And changes to NICs on termination payments also delayed until April 2020
Employers still getting to grips with the new 'Post-employment notice pay rules' will be pleased to see that the proposed introduction of employer Class 1A NICs on termination payments over £30,000 has also been delayed until April 2020. These changes were originally intended to take effect from April 2019.
A budget for 'the strivers, the grafters and the carers'
The Chancellor announced his budget with the statement that it was for 'hard working families' who 'get up early in the morning… to open up factories, shops and building sites... to drop their kids off at school… to check on elderly relatives and neighbours'. A budget for 'the strivers, the grafters and the carers'.
Indeed, the Chancellor has taken steps to 'see higher wages for those in work' and 'minimising the amount of tax we need to take from their hard-earned wages' including:
- increasing the national living wage from £7.83 to £8.21 from April 2019;
- increasing the personal allowance and higher rate threshold to £12,500 and £50,000 respectively for 2019/20 and 2020/21; and
- announcing a remit for the Low Pay Commission (LPC) for the years beyond 2020 – presumably reflecting 'the government's aspiration.. to end low pay'.
The budget confirms that the government has accepted all of the LPC's recommendations for the other national minimum wage rates to apply from April 2019, including:
- increasing the rate for 21 to 24 year olds by 4.3% from £7.38 to £7.70 per hour
- increasing the rate for 18 to 20 year olds by 4.2% from £5.90 to £6.15 per hour
- increasing the rate for 16 to 17 year olds by 3.6% from £4.20 to £4.35 per hour
- increasing the rate for apprentices by 5.4% from £3.70 to £3.90 per hour.
No further specific commitments were forthcoming regarding the Chancellor's evident support for those working families who are dropping 'their kids off at school' and checking in on 'elderly relatives and neighbours'. However, the government has earlier this month announced that it will be consulting on whether or not all jobs should be advertised on a flexible basis and on a new statutory obligation for large employers to publish their parental leave policies.
Developing the skills businesses need to succeed
The budget also confirms the government's commitment to introduce a package of reforms to strengthen the role of employers in the apprenticeship programme, so they can develop the skills they need to succeed. As part of this:
- it will make up to £450 million available to enable levy-paying employers to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains;
- it will provide up to £240 million to halve the co-investment rate for apprenticeship training to 5%;
- it will provide up to £5 million to the Institute for Apprenticeships and National Apprenticeship Service in 2019-20, to identify gaps in the training provider market and increase the number of employer-designed apprenticeship standards available to employers. All new apprentices will start on these new, higher-quality courses from September 2020; and
- the Exchequer Secretary to the Treasury and the Minister for Apprenticeships and Skills will work with a range of employers and providers to consider how they are responding to the apprenticeship levy across different sectors and regions in England, as well as the future strengthened role of apprenticeships in the post-2020 skills landscape.
The government has also shown its commitment to other skills initiatives, allocating funds to: its National Retraining Scheme, where it will work with employers to give workers the opportunity to upskill or retrain; a 'skills pilot' which, amongst other things, will help employers in Greater Manchester and surrounding areas to address local digital skills gaps through short training courses; the implementation of 'T-level's from 2020; and a review into post-18 education and funding, with the review's remit including ensuring 'employers can access the skilled workforce they need'.
Building on previous commitments, the Budget expressly deals with funding for mental health services, announcing that it will grow as a share of the overall NHS budget over the next five years and ensuring 'people with mental illness can return to, and stay in, work, boosting employment and productivity'.
What should employers be doing now?
Whilst many employers may be relieved that they now have until April 2020 to prepare for IR35 reforms, employers should not take the delay as an opportunity to sit back. Preparations should start now, with employers ensuring they understand who is engaged in their business, what role they perform and on what terms they are engaged. In that way a picture can be built up of where any risk lies and steps identified to minimise or, so far as possible, eradicate it. We must also await clarification on what will be a 'medium' or 'large' sized organisation for these purposes.
Employers must also factor in the increases to the NLW and NMW from April 2019. The Budget also references the new statutory entitlement to parental bereavement leave and pay which will come into force in April 2020 and the new tax-free childcare scheme (with childcare voucher schemes finally closing to new entrants this October), both of which will impact on existing policies and procedures.
With a clear eye on Brexit and future technologies infiltrating the workplace, employers should ensure they maximise the opportunities open to them in light of the government's commitment to further funding the apprenticeship levy and skills training. Indeed, this is an area where we may see further developments with the government announcing that it is working with the ONS to better understand how its investment in people will help improve their earning and skills potential.