Post-Brexit HR Strategic and Fiscal Planning (Wyn Lewis)
Wednesday, November 30, 2016
Wyn Lewis is an expert in Employment Law and HR issues. Find out his thoughts about corporate HR strategic and fiscal planning in a post-Brexit environment.
The UK Chancellor (or, to use his full title for those who are interested, the Chancellor and Under-Treasurer of Her Majesty's Exchequer) Philip Hammond, published his Autumn Statement on 23 November 2016.
The Autumn Statement is one of the two statements (the other being the April Budget) made to Parliament by the Treasury after the publication of economic forecasts and hints at Things To Come in Government planning.
The Autumn Statement is often regarded by HR strategists and budget holders as an indicator of what might be required in the next year – this being particularly relevant now, given how the cost to the UK of leaving the EU might affect employer budgets.
Unusually, there was quite a lot in this particular Autumn Statement that will be of immediate and future interest to UK employment lawyers and to HR staff focusing on staff wage costs, flexible benefits and on strategic change post-Brexit.
This is why:
- Employee Shareholders: the ability of employees to have “Employee Shareholder” status and benefit from a more-lenient-than-standard Capital Gains Tax advantages in exchange for giving up certain statutory employment protection rights, is to be abolished for schemes set up after 1 December 2016. The employee shareholder regime never really caught on and, instead of improving flexibility in the workforce (which is what was – somewhat idealistically - planned) it’s instead been used for tax planning purposes by wealthy individuals, especially in the field of private equity investors. Quite why anyone is surprised by this is a mystery, as it was foreshadowed in the consultation leading to the legislation that set up things in the first place.
- National Living Wage: this is to increase from £7.20 per hour to £7.50 per hour from April 2017 for workers aged 25 and over. Of course the National Living Wage (which is recommended) isn’t the same as the National Minimum Wage (which is mandatory) and, although closer to the Government's 2020 target of £9.00 per hour, will still be well below the pundits’ recommended £8.45 per hour across the UK and £9.75 per hour in London. Of course many employers pay more than that already, but for those that don’t, there will be a need to budget carefully when it comes to pay reviews and the ability to pay bonuses.
- Personal Services Companies: if you use contractors who have personal services companies, then you’ll be familiar with the IR35 regime, which puts the responsibility on the end user, rather than the personal services company, for determining whether PAYE applies. But if you’re involved with the public sector (which is a bit vague and probably means everything that isn’t obviously private sector – so the ambit is potentially very wide) you’ll need to be more careful. The reason is that the PAYE arrangements are going to get tougher (and probably audited more often). More will become known when draft legislation is published in December 2016.
- Salary sacrifice: this is to be phased out – presumably as a way of giving HMRC more revenue (and also helping the Government to reduce the UK fiscal debt). But phasing out isn’t new – it was announced some time ago, but has now “gone firm”. Also there are exceptions (for childcare costs, cycle to work scheme, ULE motor vehicles and pensions) and, as these tend to be the usual flexible benefits that employers offer, the effect of phasing out may not be noticed. Phasing out is also not (entirely) retrospective – so several arrangements (including cars, accommodation and school fees) in place before April 2017 will be maintained for up to 4 years.
- Termination payments: the long-cherished £30,000 tax free band (worth much less in real terms now, of course, than it was when it was first introduced and then reduced to £30,000 in the pre-Brexit 1990s) is to remain (sort of…). But (from April 2018 – i.e. in 18 months’ time) the excess over the tax free band will now be subject to employer NIC contributions that are currently exempt from all NICs; and tax and NICs will apply to non-contractual PILONs. So there may be a glut of dismissals nearer the time to make use of the current more benevolent regime.
But this isn’t everything to watch out for. There’s more in the pipeline for 2016 and afterwards. This is a small selection:
- Brexit: Article 50 of the Treaty on the European Union may be triggered by the end of March 2017
- Gender Pay Gap Reporting Regulations: coming into force in April 2017
- Parental Leave and Grandparents: expected in 2018
- Termination Payments in the public sector: there are likely to be regulations capping the value of exit payments (or arrangements?) at £95,000 before tax.
As ever… watch this space. For future developments; and to see Wyn's other blogs for Cubism's specialist employment group at Golden Leaver.