The Budget 2020: what HR professionals need to know
Newly appointed Chancellor Rishi Sunak has delivered the government’s Budget. Here’s a roundup of the key measures and issues HR professionals should be aware of.
Coronavirus - £30bn to be spent to combat COVID-19
With coronavirus recently being officially declared a pandemic by the World Health Organisation (WHO), this is an issue at the forefront of most people’s minds right now. The government set out measures to mitigate the effects of the outbreak.
This includes ensuring that all employees who have to self-isolate are entitled to Statutory Sick Pay (SSP). In a bid to soften the blow for small businesses, the Chancellor announced that companies with fewer than 250 staff will be refunded for sick pay payments for two weeks.
The amount of sick pay employees receive will vary from company to company. While some employees’ contracts allow them their usual rate of pay during sick leave, if they are self-isolating but are not actually sick, they may not automatically be entitled to their contractual sick pay.
In cases where employees do not receive fully paid sick leave, or if they are not entitled to contractual sick leave, there may be minimum payments they can rely on – i.e. Statutory Sick Pay. This is set to £94.25 per week (£95.85 from 6 April 2020), although some employers may choose to pay more.
To get Statutory Sick Pay, people need to be earning at least £118 (£120 from 6 April 2020) per week. Those on zero hours contracts may earn less than this and therefore not entitled to statutory sick pay. Self-employed people will also be exempt from this.
Those not eligible for Statutory Sick Pay will be able to claim Employment and Support Allowance (ESA) benefit, and they will receive it from day one of their illness, rather than a week later. ESA will be paid to those who are too sick to work, provided they meet certain conditions, and is set at £73.10 per week, or £57.90 for those aged under 25.
There was no mention of any financial support for those having to pay for childcare or people caring for dependents who have to self-isolate due to coronavirus.
For advice on best practice around sick pay visit the ACAS site.
IR35 - hotly debated tax laws to swing into action
The controversial IR35 legislation, affecting the amount of tax paid by the self-employed, will be extended to the private sector on 6 April 2020. The reforms mean that thousands of contractors and freelancers who work for a company like an employee may have to pay the same level of tax that permanent staff pay.
Learning and Development – £2.5 billion for a National Skills Fund, but no further investment in the Apprenticeship Levy
New measures put in place show a shift in emphasis towards technical and vocational education, with a new National Skills Fund to improve adult skills. The Chancellor said the government could “consult widely in the spring” on how the money can be most effectively spent.
Notably, however, the government has confirmed that it will not be providing any new funding for apprenticeships. Instead, the Budget document stated that the government will “look at how to improve the working of the apprenticeship levy” in the run-up to this year’s spending review.
New neonatal leave introduced for parents of premature babies
The Budget held some welcome news for parents of premature babies, who will now receive an extra 12 weeks’ paid leave on top of existing maternity and paternity pay. This means parents will receive statutory paid leave of around £160 a week while a child is in neonatal care, and will be available to all parents whose child is in care for more than a week. It is still unclear whether this is open to both parents at the same time.
It seems that the government will bear most if not all of the cost of this policy, so this will not fall on employers. Businesses may struggle to plan for neonatal leave, due to the uncertain nature of premature births, but it is important that they have contingencies in place that support employees while ensuring continuity of business.
National Insurance threshold rises to £9,500
The government has raised the national insurance threshold from £8,632 to £9,500 a year, which means that approximately 500,000 more people will now be exempt from paying it. It will save employees earning more than £9,500 p.a. around £85 per year.
In addition, the National Living Wage will rise to more than £10.50 an hour in 2024, compared to £8.21 at present. The new rate will apply to everyone aged over 21, as opposed to the current threshold of 25.
Pensions shake up
The state pension is to rise by 3.9% in the 2020-21 tax year.
Meanwhile, savers will see a boost to how much they can save each year and still earn tax relief as the pensions threshold has increased from £110,000 to £200,000.
The pension lifetime allowance has been set at £1,073,000 for 2020-21.
Coronavirus - £30bn to be spent to combat COVID-19
With coronavirus recently being officially declared a pandemic by the World Health Organisation (WHO), this is an issue at the forefront of most people’s minds right now. The government set out measures to mitigate the effects of the outbreak.
This includes ensuring that all employees who have to self-isolate are entitled to Statutory Sick Pay (SSP). In a bid to soften the blow for small businesses, the Chancellor announced that companies with fewer than 250 staff will be refunded for sick pay payments for two weeks.
The amount of sick pay employees receive will vary from company to company. While some employees’ contracts allow them their usual rate of pay during sick leave, if they are self-isolating but are not actually sick, they may not automatically be entitled to their contractual sick pay.
In cases where employees do not receive fully paid sick leave, or if they are not entitled to contractual sick leave, there may be minimum payments they can rely on – i.e. Statutory Sick Pay. This is set to £94.25 per week (£95.85 from 6 April 2020), although some employers may choose to pay more.
To get Statutory Sick Pay, people need to be earning at least £118 (£120 from 6 April 2020) per week. Those on zero hours contracts may earn less than this and therefore not entitled to statutory sick pay. Self-employed people will also be exempt from this.
Those not eligible for Statutory Sick Pay will be able to claim Employment and Support Allowance (ESA) benefit, and they will receive it from day one of their illness, rather than a week later. ESA will be paid to those who are too sick to work, provided they meet certain conditions, and is set at £73.10 per week, or £57.90 for those aged under 25.
There was no mention of any financial support for those having to pay for childcare or people caring for dependents who have to self-isolate due to coronavirus.
For advice on best practice around sick pay visit the ACAS site.
IR35 - hotly debated tax laws to swing into action
The controversial IR35 legislation, affecting the amount of tax paid by the self-employed, will be extended to the private sector on 6 April 2020. The reforms mean that thousands of contractors and freelancers who work for a company like an employee may have to pay the same level of tax that permanent staff pay.
Learning and Development – £2.5 billion for a National Skills Fund, but no further investment in the Apprenticeship Levy
New measures put in place show a shift in emphasis towards technical and vocational education, with a new National Skills Fund to improve adult skills. The Chancellor said the government could “consult widely in the spring” on how the money can be most effectively spent.
Notably, however, the government has confirmed that it will not be providing any new funding for apprenticeships. Instead, the Budget document stated that the government will “look at how to improve the working of the apprenticeship levy” in the run-up to this year’s spending review.
New neonatal leave introduced for parents of premature babies
The Budget held some welcome news for parents of premature babies, who will now receive an extra 12 weeks’ paid leave on top of existing maternity and paternity pay. This means parents will receive statutory paid leave of around £160 a week while a child is in neonatal care, and will be available to all parents whose child is in care for more than a week. It is still unclear whether this is open to both parents at the same time.
It seems that the government will bear most if not all of the cost of this policy, so this will not fall on employers. Businesses may struggle to plan for neonatal leave, due to the uncertain nature of premature births, but it is important that they have contingencies in place that support employees while ensuring continuity of business.
National Insurance threshold rises to £9,500
The government has raised the national insurance threshold from £8,632 to £9,500 a year, which means that approximately 500,000 more people will now be exempt from paying it. It will save employees earning more than £9,500 p.a. around £85 per year.
In addition, the National Living Wage will rise to more than £10.50 an hour in 2024, compared to £8.21 at present. The new rate will apply to everyone aged over 21, as opposed to the current threshold of 25.
Pensions shake up
The state pension is to rise by 3.9% in the 2020-21 tax year.
Meanwhile, savers will see a boost to how much they can save each year and still earn tax relief as the pensions threshold has increased from £110,000 to £200,000.
The pension lifetime allowance has been set at £1,073,000 for 2020-21.
The contents of this page are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.