A proposal to backdate tax on employee assistance programmes (EAPs) by up to seven years is putting doubt over their future existence.
Ceridian, a provider of human resources services, is calling on employers to join forces to put pressure on the government to avoid taxing EAPs.
EAPs are a mechanism for providing counselling and other forms of assistance, advice and information to employees on a systematic and uniform basis.
Chartered Institute of Personnel and Development (CIPD) research from 2006 shows that 28 per cent of employers had EAPs, while a further 12 per cent were planning to introduce them in the two years to spring 2008.
The move is being criticised by Ceridian, that claims that the return for the government doesn’t add up. They say that an average EAP cost in the UK is £10 per employee and with an estimated five million of employees covered by such services, at a 20 per cent tax rate, the HMRC will only raise £10 million.
According to Ceridian, to collect an estimated four and a half million P11Ds will probably cost more. Practically argue the outfit; collecting this number of P11Ds may bring the Inland Revenue department in charge to a grinding halt.
Ceridian also say that EAPs provide a valuable service. Paul Avis, corporate development manager, at the firm said: “According to the CBI, the cost of absence due to ill health is costing British business £13bn per year and EAPs can make a positive impact on absence costs by promoting better employee health and wellbeing.”
Speaking exclusively to HR Zone, Charles Cotton, reward adviser at the CIPD said: “While the take up for EAPs is generally low the people that use them find them invaluable. Our concern, if these proposals go ahead, is that organisations will stop providing them. It’s the small to medium sized and voluntary organisations that will be hit the hardest. Many of the larger companies that already provide them will continue to do so even if they are taxed but for those where it’s an extra they may decide it’s too expensive to run.”
The CIPD are running a poll to gain more evidence to present the case to government.
