Five measures set out in the HM Treasury Budget Report 2016 will impact on employment.

Termination payments: The Government states that the rules are complex and the exemptions “incentivise employers to manipulate the rules, structuring arrangements to include payments that are ordinarily taxable such as notice and bonuses to minimise the tax and National Insurance due”. From April 2018, the Government will tighten the scope of the exemption to prevent manipulation and align the rules so employer National Insurance contributions (NICs) are due on those payments above £30,000 that are already subject to income tax. The first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee NICs. The Government will undertake a technical consultation on tightening the scope of the exemption. These changes will be introduced in the Finance Bill 2017 and a future National Insurance Contributions Bill. See Paras 1.145, 1.146 and 2.26. 

Extension of Shared Parental Leave and Pay to grandparents: The Government will launch a consultation in May 2016 on how to implement its commitment to extend Shared Parental Leave and Pay to working grandparents. The consultation will cover options for streamlining the system, including simplifying the eligibility requirements and notification system, and will explore the potential to make better use of digital technology. See Para 1.136

Salary sacrifice: The Government wants to encourage employers to offer certain benefits but is concerned about the 30% growth of salary sacrifice schemes since 2010. The Government is therefore considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes. However, the intention is that pension saving, childcare and health-related benefits such as Cycle to Work should continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements. See Para 1.147

Apprenticeship levy: From April 2017, employers will receive a 10% top-up to their monthly apprenticeship levy contributions in England and this will be available for them to spend on apprenticeship training through their digital account. The Government will set out further details on the operating model in April and draft funding rates will be published in June 2016. See Para 1.99

Loss of NICs allowance for employers of illegal workers: From 2018, employers will be denied the NICs employment allowance for a period of one year if they are subject to a civil penalty for employing illegal workers. See Para 2.24

Note that the report also confirms the introduction of the new mandatory National Living Wage (NLW) from 1 April 2016, set at £7.20 an hour for workers aged 25 and above, and at Para 1.141 states that the Government has asked the Low Pay Commission to set out how the new NLW will reach 60% of median earnings by 2020. Based on the OBR’s March 2016 earnings forecasts, a NLW of 60% of median earnings would be £9 an hour in 2020, in line with the Government’s objective.

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