E Point Perfect
Law \ Legal

UK Employment Law: key messages from the UK Government’s Growth Plan


On 23 September 2022, the new Chancellor, Kwasi Kwarteng, unveiled the Growth Plan 2022 detailing the UK government’s set of economic policies aimed at, as the name suggests, boosting economic growth in the UK by improving competition and improving living standards by allowing people to retain more income. Much has been said in recent days on the merits and dangers of the plan and whilst we have seen an immediate impact on the value of the pound, it remains to be seen whether in the longer term the plan meets its aims and supports the country in navigating the likely impending recession. In the meantime, we summarise below the key elements of the plan from a UK employment perspective:

  • National Insurance cuts: On 6 April 2022, national insurance contributions (NICs) were increased by 1.25 percentage points, with a plan that this would make way for a new health and social care levy at the same level from April 2023. These have now both been scrapped. The NIC increase will be reversed from November 2022 and the health and social care levy will no longer be introduced next year. This is intended to make it cheaper for employers to employ staff, and allow more workers to keep more of what they earn.
  • Income tax cuts: The basic rate of income tax will reduce by 1 percentage point, from 20% to 19%, from April 2023, a year earlier than planned, and the highest income tax band of 45% for income over £150,000 is being abolished, again from April 2023. As with the NIC changes, this is intended to enable workers to retain more of their earnings.It is also hoped that the abolition of the top income tax band will attract more high earning talent to the UK.
  • Banker bonuses: A cap on banker’s bonuses was introduced by the EU following the 2008 financial crisis as it was believed that unlimited bonuses encouraged high-risk taking behaviour, and that a cap would limit the behaviour, which resulted in the crash. However, the cap came in for criticism for pushing up base salaries and bank’s fixed costs without allowing for adjustment for financial performance. Following Brexit, and the UK’s freedom to depart from the EU rules, that cap (of up to 2 times fixed salary) is now being removed. The thinking is that without the cap, the UK can be more competitive globally, being able to align pay practices with other markets, promoting UK economic growth, and to allow the UK to attract and retain talent in the UK.

  • Industrial action: The spate of industrial action in the transport industry did not go without comment in the Growth Plan, with the government stating its intention to introduce legislation to ensure that minimum service levels are in place so that it does not become impossible for people to get to work. In addition, legislation is anticipated to ensure that any pay offers are put to a members’ vote, with strike action only permitted if rejected. It seems unlikely that this new requirement will have a material impact on the number of strikes going ahead but it does mean more process and delay for unions considering strike action. The details and timescale of this legislation are yet to be announced. However, we have already seen the government work at pace this year to change legislation to permit agency workers to cover striking workers and as pay disputes continue and more strike dates set, we may see developments fairly quickly.
  • IR35: The IR35 reforms that were introduced in the public sector in 2017 and the private sector in April 2021, will be repealed from 6 April 2023. IR35 deals with the responsibility for assessing deemed employment status for tax purposes, and payment of any resulting tax and NICs, for individuals who provide services through an intermediary service company. Under current IR35 rules, it is the end user client’s responsibility to carry out a status determination to establish whether, but for the intermediary company, the contractor would be an employee and, if deemed employment is assessed to arise, the end user client is responsible for tax and NIC liabilities. The repeal of these rules will mean that we look set to return to a position whereby it is the contractor’s service company’s responsibility to ensure that the correct tax and NICs are paid.
  • Boosting employment: The Growth Plan notes how a significant number of over 50s have left employment since the pandemic and how businesses can struggle to recruit. Although unemployment rates are at a historic low, the government wants to get more people, including the over 50s, back into work through increased work coaching support and specific support for over 50s. There is also reference to consideration of further options to encourage people to stay in the labour market for longer, although no indication has been given as to what these options may be.  The emphasis is on boosting productivity, driving up income and growth, although largely in the context of decreasing people’s reliance on universal credit and to help them save for retirement, but no actual measures have been announced as of yet.
  • Childcare: The plan recognises that access to affordable and flexible childcare is a hindrance to work for many families and plans to bring forward reforms to improve accessibility to affordable and flexible childcare. It is unclear what these reforms are or the timescale intended.
  • Immigration: The government signposted the desire to ensure immigration policies support getting people with the right skills into the UK, and that it considers skilled and highly skilled immigrants can be particularly conducive to improving economic growth, innovation and productivity. In addition to visa routes already introduced, a plan is expected in the coming weeks with details of how the government proposes to ensure the immigration system supports economic growth while maintaining the right balance of migration.



Source link

Related posts

White House Releases Guidance on AI

SALT partners to present at TEI Annual Conference, COST Annual Meeting next week

Is Loss Sharing an “Indispensable Essential” of Partnership?

Nebraska’s weak laws on bad faith in workers’ compensation enable employer insistence on resignation as a condition of settlement

Using Question Forms to Improve Presentations

What to do next if your UK Spouse visa is refused?