Budget changes and the workplace

2015-07-13 chris posted:

On Wednesday 8th July 2015, George Osborne delivered his 7th budget as Chancellor, being the 1st for a majority conservative government since 1996.

One of the major announcements is the introduction of a new National Living Wage from April 2016, starting at £7.20 an hour, rising to £9 an hour by 2020, giving an estimated 2.5 million people a £5,000 (11%) pay rise over the next 5 years.

The National Living Wage will replace the National Minimum Wage for workers over 25 - currently the minimum wage for all adults over 21 is £6.50 an hour. The Low Pay Commission, which recommends the level of the National Minimum Wage, will be empowered to advise on the level of the National Living Wage to reflect the growth of earnings in the economy.

This increase will be welcomed by thousands of workers who are on minimum wage, but it may bring additional burden to businesses that cannot afford to pay their staff higher wages. The Office for Budget Responsibility (OBR) predicts that by 2020, there will be 60,000 fewer jobs as a result of the National Living Wage, but that millions will see the benefit of a pay rise. It is estimated that the cost to businesses will amount to 1% of their profits, and coincides with a cut of 1% in corporation tax, which decreases from 20% to 19% in 2017 and to 18% in 2020.

Small businesses will also benefit from a cut in their national insurance contributions as from 2016 the Employment Allowance will be increased from £2,000 to £3,000. This means that a small firm will be able to employ four full-time people on the National Living Wage and pay no employer’s national insurance to HMRC.

The Chancellor also announced that the Personal Allowance will rise to £11,000 in 2016, which means that people working 30 hours a week on the minimum wage should pay no income tax on their earnings.

Some have welcomed the Chancellor’s budget, with the director-general of the CBI stating that the firms will be able to balance the books and boost investment, but will be concerned by the prospect of wage increases. Furthermore, the chief economist for the CIPD has stated that there are concerns about employability in the low pay sector such as retail, hairdressing, hospitality and care, and that as a result, the delivery of apprenticeships and the Employment Allowance will be critical to making this budget work in the low pay sector.

Our employment solicitors Jennifer Renney-Butland and Philip McCabe are available to answer any questions you might have on employment matters – just call us on 01225 632240 or email us at info@renneyandco.com.

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