Coronavirus – £30bn to be spent to combat COVID-19
With coronavirus recently being officially declared a pandemic by the World Health Organization (WHO), this is an issue at the forefront of most people’s minds right now. While the UK has yet to implement widespread social isolation measures (at the time of writing), the government did set out measures to mitigate the effects of the outbreak.
This includes ensuring that all employees who have to self-isolate are entitled to Statutory Sick Pay (SSP). In a bid to soften the blow for small businesses, the Chancellor announced that companies with fewer than 250 staff will be refunded for sick pay payments for two weeks.
The amount of sick pay employees receive will vary from company to company. While some employees’ contracts allow them their usual rate of pay during sick leave, if they are self-isolating but are not actually sick, they may not automatically be entitled to their contractual sick pay.
In cases where employees do not receive fully paid sick leave, or if they are not entitled to contractual sick leave, there may be minimum payments they can rely on – i.e. Statutory Sick Pay. This is set to £94.25 per week, although some employers may choose to pay more.
To get Statutory Sick Pay, people need to be earning at least £118 per week. Those on zero hours contracts may earn less than this and therefore not be entitled to statutory sick pay. Self-employed people will also be exempt from this.
Those not eligible for Statutory Sick Pay will be able to claim Employment and Support Allowance (ESA) benefit, and they will receive it from day one of their illness, rather than a week later. ESA will be paid to those who are too sick to work, provided they meet certain conditions, and is set at £73.10 per week, or £57.90 for those aged under 25.
There was no mention of any financial support for those having to pay for childcare or people caring for dependents who have to self-isolate due to coronavirus.
“There are nearly seven million people in the UK who fall outside SSP eligibility, many who are eligible will struggle to survive on £94.25 a week,” said Ben Willmott, head of public policy at the CIPD. He recommended that the government should consider raising the SSP level closer to the National Living Wage, and making it available to all, including the self-employed or workers in the gig economy.
For advice on best practice around sick pay visit the ACAS site.
IR35 – hotly debated tax laws to swing into action
The controversial IR35 legislation, affecting the amount of tax paid by the self-employed, will be extended to the private sector on 6 April 2020. The reforms mean that thousands of contractors and freelancers who work for a company like an employee may have to pay the same level of tax that permanent staff pay
This will be a major challenge not just for small businesses who rely on these professionals, but also for medium sized companies in sectors like IT and construction, according to Bob Trunchion, tax partner at MHA MacIntyre Hudson.
“IR35 has added a sting that impacts whether some businesses will qualify for coronavirus relief measures,” he explained. “The new rules mean that many medium sized companies have pre-emptively taken on previously contracted workers as employees, swelling the numbers on their payroll. Some will now be too big for reliefs like the sick pay refund, but would have been eligible had IR35 been delayed. These companies will miss out on any meaningful support but still have all the cashflow risks the virus could prompt”.
“The disastrous IR35 reforms have already decimated the UK’s flexible workforce,” added James Poyser, CEO of inniAccounts. “The right thing would have been to announce wider reforms to make the self-employed valued first-class citizens, with employment rights, and allow them to play their part in ‘getting it done”.
Feel unprepared for IR35? Here’s what you need to know.
Learning and development – £2.5 billion for a National Skills Fund, but no further investment in the Apprenticeship Levy
New measures put in place show a shift in emphasis towards technical and vocational education, with a new National Skills Fund to improve adult skills. The Chancellor said the government could “consult widely in the spring” on how the money can be most effectively spent.
Notably, however, the government has confirmed that it will not be providing any new funding for apprenticeships. Instead, the Budget document stated that the government will “look at how to improve the working of the apprenticeship levy” in the run-up to this year’s spending review.
“The media has rightly criticised the Apprenticeship Levy in its current form because it is either being wasted on nothing or often being used to give more training to people who already have one or two degrees,” said Ben Hansford, Managing Director (Apprenticeships) at Firebrand Training. “The reason this is happening is that there is currently no prioritisation of how Levy funds are spent and no changes to this were mentioned in the budget.
“Funding must be prioritised that puts an onus on young and unskilled people in the skills the UK desperately needs, like cybersecurity, IT, manufacturing and other critical STEM subjects. This, as well as other key initiatives around adult education such as Adult Learner Loans, needs urgent attention if Post-Brexit, COVID-19 plagued Britain wants to remain competitive in the global economy,” he added.
New neonatal leave introduced for parents of premature babies
The Budget held some welcome news for parents of premature babies, who will now receive an extra 12 weeks’ paid leave on top of existing maternity and paternity pay. This means parents will receive statutory paid leave of around £160 a week while a child is in neonatal care, and will be available to all parents whose child is in care for more than a week. It is still unclear whether this is open to both parents at the same time.
“The government’s announcement results in significantly better rights for fathers and non-birthing parents at an incredibly stressful time. It will also allow mothers to preserve more of their maternity leave for bonding and caring for their child when they return home,” said Suzanne Horne, partner and head of the international employment practice at international law firm, Paul Hastings.
“It seems that the government will bear most if not all of the cost of this policy, so this will not fall on employers,” commented Donna Martin, head of employment and immigration law at Mackrell Solicitors. “Businesses may struggle to plan for neonatal leave, due to the uncertain nature of premature births, but it is important that they have contingencies in place that support employees while ensuring continuity of business”.
National insurance threshold rises to £9,500
The government has raised the national insurance threshold from £8,632 to £9,500 a year, which means that approximately 500,000 more people will now be exempt from paying it. It will save employees earning more than £9,500 p.a. around £85 per year.
In addition, the National Living Wage will rise to more than £10.50 an hour in 2024, compared to £8.21 at present. The new rate will apply to everyone aged over 21, as opposed to the current threshold of 25.
“The increase in employment allowance on National Insurance bills will be welcomed by small firms and charities, especially those who have seen their payroll costs jump due to rises in the National Living Wage,” commented Ben Willmott. He warned, however, that those firms – particularly those without HR support – should be aware that the allowance will now have to be claimed annually, and won’t be rolled forward as was previously the case.
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Pensions shake up
The state pension is to rise by 3.9% in the 2020-21 tax year.
Meanwhile, savers will see a boost to how much they can save each year and still earn tax relief as the pensions threshold has increased from £110,000 to £200,000.
The pension lifetime allowance has been set at £1,073,000 for 2020-21.
For a more detailed look at the Budget 2020, visit the Budget hub on our sister site AccountingWEB.co.uk.
