The measures that will make employers happy – and what the chancellor might actually deliver
The penultimate budget before the 2015 general election is an opportunity for the chancellor to set the agenda for the next government – and to court the all-important HR vote. What will George Osborne pull out of his red box to make employers smile on 19 March? People Management gets the inside track…
Longer hours
Bear with us here… while there are plenty of people who’d like to ditch their ever-increasing workload and get home a bit earlier, not everyone who wants more hours is able to get them, according to CIPD chief economist Mark Beatson. He sees the budget as a way for the chancellor to encourage employers to offer more hours with a change in the national insurance contribution threshold: “Employers pay NICs on the salaries of their employees – it’s a percentage which changes according to salary. If you earn less than the threshold (£148 a week) you pay nothing in employer NICs. But as soon as you hit the threshold you pay that percentage on the full salary.”
If you’ve got part-time workers, it makes sense to keep them earning just under £148 a week so you avoid paying NICs. “And for employers paying the national minimum wage, the incentive is to make sure people’s hours stay within the NICs threshold limits,” adds Beatson. This creates a problem for people on lower salaries, who are often claiming in-work benefits. Under the government’s new Universal Credit benefits system, taking on more hours is encouraged, with benefits reduced on a sliding scale.
Beatson says: “You have a lot of people who might have been stuck under the £148 threshold, who would quite like to move their hours up a bit. Increasing the threshold to £220.85 a week will let them do that.”
Increased skills
Recent CIPD research shows that above-inflation pay rises are unlikely to make a sustained appearance without a major boost to UK productivity. An influx of targeted skills development might just do the trick. But, Beatson explains, this is no short-term fix: it requires employers to strap in for the long haul. The chancellor could kick-start things by announcing a review of government skills policy.
“We can see that productivity has been weak, so we need to talk about what contribution skills could make to that. The budget could ask a fundamental question about demand for skills and whether we are making the best use of our existing workforce. This would help the economy get on an upward track in terms of productivity, because that’s what’s going to bring wages up.”
Stronger careers
More funding for careers advice would help young people make a smooth transition between education and work, says Beatson. Extra cash could be reallocated to help build links between education and employers to show young people where the openings are.
“Opportunities – for example STEM (science, technology, engineering and maths) careers – can be closed off for young people at an early age if they choose not to do a certain subject at 14. Careers education is not something you can leave to the market. We need to build that linkage up, for example with employers going into schools.”
More money
The yearly rise in income tax allowance – the amount people can earn before paying income tax – has become a regular feature of the coalition chancellor’s speech. And it’s expected that the threshold will rise to £10,000 for the 2014/15 tax year.
This will mean that workers on lower pay will have more to spend without employers having to raise salaries. “An increase would give employees, especially lower paid people, more available income to spend on goods and services as well as helping them to avoid the impact of the increase in the cost of living,” says Charles Cotton, CIPD reward adviser. “Ideally we’d like it to rise to a level where anyone on the national minimum wage, calculated as an annual sum, would not have to pay income tax.”
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Long shots - Osborne’s outside bets
Green benefits
Cycle-to-work schemes (left), money off public transport or tax relief for energy-efficient company cars could combat flood-related torpor.
Public sector pay
Could localised pay bargaining be put forward as an alternative to extending the overall 1 per cent pay cap for another year?
Support for childcare
Under the Universal Credit system, some parents can claim more childcare support than others. Will this inequality be rethought?
Alcohol duty frozen
If all else fails, at least there’s the Christmas party to look forward to…