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Annie Hayes

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Colborn’s Corner: Budgeting for success?

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Gordon’s Brown’s recent budget contained a few surprises and doubtless the pundits will be pouring over the detail for some time, if only to come up with predictions as to when he changes job. But what impact does the budget have for HR and can we learn anything from an annual budgeting process?

I suppose the main elements of the budget that will have the biggest, negative impact for HR teams will be the administration linked to mobile phones and the Home Computing Initiative (HCI).

I am sure for many the former issue will simply be an administrative pain for those it impacts upon whilst the latter may have an influence on IT awareness and the ability, or enthusiasm, of staff to work from home.

It will be interesting to see if this measure has any impact on matters relating to flexible working and work/life balance. There are of course other measures in the budget that will impact on us, the commitments to training for those aged under 25 (interesting to know this relates to the impending age discrimination legislation!) will make free provision to bring people up to a certain level, simplification of the tax treatment of eye tests and so on.

What these changes do serve to remind us of is the danger of developing employee benefit strategies that rely on tax breaks to make them unattractive when the tax regime changes. A key test that HR and reward specialists need to ask themselves is ‘would we put this benefit in place even if no tax relief were available?’

For example, currently employee assistance programmes (EAP’s) attract no taxable value. Yet if they did, I suspect many employers would pick up the tab for them, seeing them as being of value in their own right, rather than just a tax-efficient way of providing a benefit. But what other esoteric benefits are out there? What examples do you have of benefits you have seen in place that have caused problems when taxes have changed?

Moving away from Gordon Brown, the concept of an annual review of benefits is not necessarily a bad thing. Within many organisations there is frequently a ratchet approach to benefits, whereby they only ever increase or get extended.

There are of course exceptions in the areas such as pensions, but by and large few benefits are ever removed by organisations. Of course there are contractual issues in play here – you cannot simply remove a tranche of benefits without risking damaging employment relations and leading to a constructive dismissal claim.

What are the barriers preventing HR professionals from proactively reviewing the effectiveness of benefits?

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Annie Hayes

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