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What does the new budget mean for businesses and HR Strategy?
Earlier this week, the First Secretary of State George Osborne released details of the new Conservative government’s 2015 budget, which has prompted mixed reviews from the public. However what does the new budget mean for businesses and what should they be doing now in preparation of the new reforms?
National Living Wage
The main proposal which may have grabbed employer’s attention was the announcement of the new National Living Wage (NLW) in replacement of the current National Minimum Wage (NMW). The NLW, which starts at £7.20 per hour next April and is set to rise in excess of £9 per hour by 2020, will be compulsory for all business to pay to employees over the age of 25.
Although this is welcomed news for employees, many employers may be concerned about the cost implications this will have on their business. To offset the increased costs, the government has announced cuts to corporation tax to19% from 2017/18 and 18% in 2020 as well as an increase in the NIC employment allowance from £2,000 to £3,000 as of April 2016. Employers may not initially observe significant outweighed costs in relation to these new proposals however the good news is that research has shown those who currently pay the Living Wage witness increased productivity, lower absence rates and overall a much more engaged workforce. This presents substantial cost savings for businesses and if managed correctly will have a significantly positive effect on overall profits and sustainability in competitive markets.
The new government has vowed to create a further 3 million apprenticeships over the coming years to assist smaller firms to offset some of the new NLW costs, placing a new levy on large employers to fund this expansion. The new levy will help support all post-16 apprenticeships in England and provide funding for employers to use individually. Further information and details regarding the new rates and implementation plan will be set out in further consultations however it is a good idea for employers who haven’t already done so, to think about how to accommodate apprenticeships successfully within their organisation.
Local councils and mayors will now gain the power to control Sunday trading hours following a further consultation to be held in the forthcoming months. Current laws restrict stores over 3,000 square ft. to only six consecutive hours trading time between 10am and 6pm on a Sunday. Under the new measures these laws could be relaxed according to local council and mayors discretion in an attempt to boost the economy. It is difficult to forecast the effects this may present to employers but could mean Sunday trading hours are extended for larger businesses. Employers may want to start thinking about how this change could affect their business but most importantly what impact the anticipated changes will have on their workforce. Considerations surrounding current contractual working and what changes may need to be made to accommodate extended working hours should be evaluated. However it is important to be mindful that before changing working hours for existing staff, their express consent must be obtained; furthermore employees are protected from discrimination relating to religion, beliefs and their sex. Therefore employers are advised to take legal advice on this matter if it is anticipated extended Sunday trading hours will effect on your organisation. The new relaxed laws could pose detrimental to smaller retail stores who may need to consider their business strategy to remain competitive or reduce overheads.
Student Grants and benefit cuts
Maintenance grants previously paid to students with family incomes below £42,000 to assist them with University fees are also set to be scrapped and replaced by loans from 2016/17. Furthermore working age benefits have now been frozen for four years including tax credits and local housing allowance, with housing benefit for under 21’s being stopped altogether. Employers may begin to observe a significant influx of talented younger candidates entering the job market choosing to forgo university as a direct result of these cuts. It is advised employers begin aligning their talent management strategy to attract and accommodate the new candidate market to benefit from this new surge of talent.
Overall many employers may now be planning on reviewing their business strategy in anticipation of the new changes affecting them. It is important to take a rationale and strategic approach to this to ensure new changes are managed appropriately to business needs and in a realistic time scale. For help implementing a strategy or to help review an existing one, please contact a member of our HR People Team who are on hand to assist or to provide further guidance on how to plan effectively for these changes.