Employment Law Coffee Break | Spring Budget 2021: What does it mean for employers?
Published on 4th Mar 2021
Welcome to our Employment Law Coffee Break where this week we focus on the Spring Budget 2021 and what it means for employers. The Spring Budget 2021 carried on the government's theme of protecting the "jobs and livelihoods" of the British people and was presented as a long term response to Covid-19, providing total fiscal support of £407 billion over this tax year and next.
Coronavirus Job Retention Scheme
The headline announcement for employers is an extension of the Coronavirus Job Retention Scheme (CJRS) to 30 September 2021 (from 30 April 2021, when it was due to end). Neither the employer nor employee need to have used the CJRS before to apply for a grant under the extended scheme, but for periods from 1 May 2021 onwards, an employee must have been on payroll on 2 March 2021. With hopes that as the economy reopens, more businesses will be less dependent on support, funding will be tapered as follows:
- Between now and 30 June, the government will continue to pay 80% of wages for furloughed workers, up to £2,500 a month.
- From 1 July, the state support will taper off, with the government then paying 70% of usual wages for hours not worked up to a cap of £2,187.50, with employers covering the remaining 10%.
- From 1 August, the government will pay 60% of usual wages for hours not worked up to £1,875, with employers covering the remaining 20%.
Employers must pay the associated employer national insurance contributions and pension contributions on all furlough pay and can continue to top up wages above the 80% but are not required to do so.
As always, it will be important for employers to make sure that they refer to the latest guidance on the scheme to ensure that they are eligible to access grants and are doing so correctly. Use of the CJRS remains subject to HMRC scrutiny. Demonstrating its commitment to clamping down on fraud, the Chancellor announced a new dedicated unit to crack down on Covid-19 fraud where schemes such as the CJRS are being exploited. The government also confirmed an extension of the Self Employment Income Support Scheme to September 2021 and also extended its support to a further 600,000 people who filed a tax return for 2019-20.
Other measures impacting on employers include:
- Confirmation that small and medium sized employers will continue to be able to reclaim up to two weeks of eligible statutory sick pay costs per employee. However, the budget makes it clear that the "scheme is a temporary Covid-19 measure intended to support employers while levels of sickness absence are high. As with other business schemes, the government will set out steps for closing the scheme in due course". Other Covid-19 related measures include an extension of the £500 test and trace support payments in England "until this summer". The government will also extend the temporary exemptions introduced last year for employer reimbursed expenses covering the cost of home equipment and Covid-19 antigen tests (to ensure that employees who are provided with/reimbursed for the cost of an antigen test will not be liable to an income tax or NICs charge) to the 2021-22 tax year.
- Confirmation that the National Living Wage rate will increase to £8.91 from April – as part of the government's stated commitment to end low-paid working. This rate will also become available to those aged 23 (rather than 25 as at present). There is also continuing support for the lowest paid through extension of the support through universal credit and working tax credits.
- A freeze on rates of income tax and national insurance. The personal tax threshold will rise next year to £12,750 but will then be frozen until April 2026 (which will impact those who receive future pay rises).
- Additional support for apprenticeships. As part of the government's commitment "to give people the skills they need to get jobs or better jobs", in addition to the previously announced Restart programme, kick start scheme and life time skills guarantee, employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the existing scheme. This is in addition to the existing £1,000 payment the government provides for all new 16-18 year old apprentices and those under 25 with an Education, Health and Care Plan. A "new innovative flexi apprenticeship programme" will also allow people to work for a number of different employers in the same sector. An additional £126m is also provided for 40,000 more traineeships in England providing "high quality work placements and training for 16-24 year olds in 2021-22 academic year".
- A new digital training scheme for businesses. Recognising that if we learn more, we make more – and the role digitalisation has played during the Covid-19 pandemic, small and medium enterprises will be able to register for digital training through a government scheme "Help to Grow: Digital". Management training will also be provided through executive development programmes in partnership with business schools (with the government providing 90% of costs) through "Help to Grow: Management".
- A new, unsponsored points-based visa to attract the best and most promising international talent in science, research and technology, as well as new improved visa processes for scale-ups and entrepreneurs. The government has also promised to "radically" simplify bureaucracy for high skilled visa applications.
The budget identifies the vaccination roll out as "the single most important economic policy in the short term". Nevertheless, it does give rise to sensitive considerations for employers, including whether or not employees can be required or encouraged to take up the vaccine, whether evidence can be requested of vaccination as employers look to manage a wider return to work and what provisions could be made to support vaccination in employment documentation.
Anna Elliott, a partner in our employment team, discusses vaccination considerations for employers in this webinar, along with Georgie Graham, a data privacy lawyer in our commercial team who addresses the important data protection considerations which must be considered in tandem. We apologise that there was a short technical problem during the webinar due to connection problems. If you do have any questions on this developing area, please do speak to your usual Osborne Clarke contact.
What does this mean for employers?
Together with commitments to wider business support through restart grants and recovery loans, these measures will be a welcome relief to employers looking to get their businesses back up and running in accordance with the prime minister's roadmap. Many will hope that the extension of the CJRS will avert the need for wide scale redundancies as the vaccination programme continues to progress. The Covid-19 pandemic has also highlighted underlying issues such as domestic abuse, with the government recently publishing the outcome of its review into workplace support for victims. The budget pledges £19m to tackle domestic abuse in England and Wales.
The budget also has an eye on the future of work and the impact of the wider use of technology and the need to upskill the workforce. The government's Build Back Better plan for growth highlights that "Covid-19 has forced businesses to rethink their operations, how they engage with staff and their use of technology. BeTheBusiness estimate that three years' worth of digital transformation took place in three months when the required public health measures began in March 2020". The paper identifies that "80% of the workforce of 2030 are already in work today and we need to offer them the opportunity to upskill and reskill over their careers to progress and adapt to changes such as automation". To do this the "the government is transforming further education, encouraging lifelong learning through the Lifetime Skills Guarantee and building an apprenticeship revolution" as well as "encouraging the adoption and diffusion of innovative ideas and technologies across the economy".
An immediate challenge for businesses, however, will be to manage employee expectations around continued homeworking. The government has already committed to reviewing how social distancing measures should be continued and eased, and as part of this is looking at the continuation of the guidance that all those who can work from home should. With the outcome of the review expected before 21 June, this will be an issue which employers must now prioritise. However, continued homeworking is just one part of the larger picture and employers are now having to address a number of fundamental issues about how their businesses are run, with reviews of property portfolios, de-carbonisation initiatives and how working models support diversity just some of the substantial issues having to be considered.