Here are the key HR-related announcements of Chancellor George Osborne’s Autumn Budget Statement:
Civil service spending/job cuts
Whitehall departments will be required to shave 1% off their running costs during the financial year 2013/14 and a further 2% the following year in order to save £3.4 billion on top of existing cuts.
Another £1.6 billion will also be freed up from underspent budgets in a bid to divert money from day-to-day spending towards building projects in a bid to boost economic growth.
Verdict: The Public and Commercial Services Union predicts that the new cuts could result in nearly 13,500 civil service jobs being lost on top of the 50,000 that are already scheduled to be axed over the next two years and the 63,000 that have already gone.
Contractors
Planned attempts to curb tax avoidance by taxing individuals working through personal services companies as if they were on the payroll, were scrapped.
Verdict: Mark Groom, a partner at management consultancy, Deloitte, said: “We welcome the withdrawal of the ‘controlling persons’ concept, which was always going to be difficult for employers to administer.”
The government now considered that new tests introduced to help identify whether the IR35 contractor rules applied to personal service companies should be enough to boost compliance and any loss of tax through ‘disguised employment’, he added.
IR35 regulations would now also be extended to cover directors as well as employees. But Groom warned that HM Revenue & Customs would “need to significantly increase its compliance checks on PCSs if IR35 is to be truly effective”.
Income tax-free personal allowances
Personal income tax allowances will be increased by a surprise £235 to £9,440 from next April, but most other allowances will only be raised by about 1% across the board.
Verdict: Francesca Lagerberg, head of tax at accountants, Grant Thornton, said: “The good news is that these items have not been frozen. The bad news is that there will not be a significant uplift, except for the personal allowance, which…is on target to hit the hallowed £10,000 before the end of this Parliament, as promised.”
Offshore umbrella companies
The government plans to conduct an internal review of “offshore intermediaries” that are being used to avoid tax and national insurance contributions. It will provide an update during the 2013 Budget.
Verdict: Mark Groom, a partner at management consultancy, Deloitte, said: "UK businesses hiring temps through UK agencies can be unwittingly at risk, if they do not look beyond the agency to check whether the real source of the workers lies offshore."
In addition, complex regulations meant that offshore employers did not have to pay national insurance contributions, even if their employees ordinarily worked in the UK.
"The respective PAYE and NIC legislation can result in unexpected liabilities for any of these parties in certain circumstances, including the end users in the UK hiring the temps," Groom said. “We welcome the government’s review, as greater certainty and protection is required for unsuspecting UK businesses.”
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Pensions
The annual allowance for pensions is to be cut from £50,000 to £40,000 from April 2014 to enable workers to think about how they could maximise their pension contributions.
Verdict: Joanne Segars, chief executive of the National Association of Pension Funds, pointed out that the government planned to take twice as much from this tax on pensions as it would from its increase in the bank levy.
But this “raid” would simply added an “extra layer of admin and cost for the businesses trying to run final salary pensions”, she warned.
“That cannot be fair, and will only undermine confidence in pension saving,” Segars said. “The Chancellor is wrong to say that the changes will only affect those at the top of the wage tree. Osborne claims he is taking a carrot away from the rich, but he is also beating many middle class savers with a stick.”
Middle managers in both the public and private sectors would be caught in the net, for example.
Moreover, people in final salary pension schemes, who had worked for the same employer for years but received a promotion or pay rise, could end up being charged tax amounting to several thousand pounds, Segars said. The self-employed and people nearing retirement who were trying to boost their pensions were also at risk.
