From attracting the long-term sick back into employment, to ‘returnships’, pensions and additional funding for childcare, yesterday’s so-called ‘back to work’ budget delivered a raft of measures designed to break down barriers to work, making for a day packed with employment changes and fresh workplace considerations.
Addressing the Houses of Parliament, Chancellor Jeremy Hunt said the budget was “aimed at achieving long-term, sustainable economic growth that delivers prosperity for the people of the United Kingdom”, in a plan that prioritised unshackling business investment and tackling labour shortages head on.
So, with the announcements instilling confidence in industry leaders and businesses, People Management takes a closer look at exactly what the changes will mean for employers and HR.
Apprenticeships for over 50s
Hunt unveiled a number of tactics to address unemployment among the over 50s, a group containing more than 3.5 million people, according to data from Age UK.
One such tactic is a new ‘returnership’ apprenticeship programme, aimed at improving existing skills-building initiatives to make them more approachable for older workers, giving them the knowledge and assistance they need to find a direct route back into the workforce.
Hunt also said he intends to ensure that people receive the best possible financial, health and career guidance well in advance of retirement with the expansion of the mid-life MOT – a review for workers in their 40s and 50s, helping them take stock of finances, skills and health to prepare for retirement and build financial resilience.
This will be an improved digital mid-life MOT tool and an expansion of the Department for Work and Pensions’ (DWP) in-person midlife MOTs for universal credit claimants who are 50 or older. The goal is to reach 40,000 claimants annually.
However, recent Institute for Fiscal Studies analysis of separate ONS data revealed that many of the 50 to 64-year-olds who are now unable to work because of long-term sickness have already been out of the labour force for five years or more.
Michelle Leeson, managing director of GC employment at The Growth Company, says for those who are the furthest away from the labour market, it can be “extremely difficult” to consider returning, and the only way for people to reach their full potential is by removing obstacles to learning and employment.
Meanwhile, Kerry Linley, founder and CEO of apprenticeship software company Rubitek, says that although the introduction of the returnerships programme “sounds broadly positive, the immediate question is how it will work in practice”, and that while it may be a boost for employers, who will have the option to upskill both young and “experienced” talent, there is a concern that young people could miss out.
“The functionality of the existing apprenticeship levy is already problematic, and its absence in the budget announcement proves the government is yet to find a solution to problems surrounding it. The purpose of apprenticeships has always been to equip young people with new skills, and it’s vital we do not lose sight of that,” says Linley.
Stuart Lewis, chief executive of Rest Less, welcomes the intention behind the programme to assist the over 50s in returning to the workforce, but says “we need to see more detail”, while adding that “repackaging existing programmes is unlikely to make a significant difference to the masses”.
Similarly, Tania Bowers, global public policy director at the Association of Professional Staffing Companies, says the plan “will not provide the skills that are needed immediately”, and that the "barriers to upskilling the workforce are multi-faceted and unfortunately not all have been addressed in Jeremy Hunt's statement".
Pension tax reform
In a further bid to keep older workers in the labour market, Hunt announced that the annual allowance (AA) would be increased from £40,000 to £60,000 – a move he dubbed the biggest change in UK pension tax since 2006.
The chancellor emphasised that, thanks to this policy, an estimated 80 per cent of NHS doctors would not receive a tax charge with respect to accruals under the 2015 NHS career average scheme, as well as benefiting many more experienced workers.
David Gallagher, head of pensions at Fieldfisher, sees the change as “a welcome reform” and says that it “should be quite a simple change to implement and unlikely to have any transitional complexity".
In addition to the increased AA, the chancellor announced the complete abolition of the pensions tax lifetime allowance (LTA) that “will encourage pension saving, which in itself is often reinvested in the UK economy”, Gallagher explains.
Influenced by the cost of living crisis and economic uncertainty, last year’s Royal London research found that one in three (30 per cent) people would change their retirement plans because of the cost of living crisis. At the same time, a third (33 per cent) of those planning to retire in the following five years were changing their retirement plans.
Offering advice for employers, Gallagher says that, after the policy change, some may want to allow employees to rejoin closed schemes that they may have only left because of LTA issues.
And while a lot is changing, he says one thing that remains the same is the limit on tax-free cash on retirement – the pension commencement lump sum – which has been broadly 25 per cent of LTA. However, “this will be frozen at its current level of £268,275”.
Joshua Gerstler, chartered financial planner and owner of the Orchard Practice, also sees the changes announced as "really positive for workers,” with another great piece of news being the increase in the money purchase annual allowance (MPAA) from £4,000 to £10,000. “The MPAA meant that if you had taken one penny of income from your pension, you or your employer could not contribute more than £4,000 per year. Plenty of workers over 55 have taken income from their pension and continued to work so were caught out by this,” Gerstler says.
However, the new increase would allow older workers to continue to fund their pensions for when they get to retirement.
Helping the disabled and long-term sick back to work
Forming part of the government’s main pledge to get people back to work, with Hunt saying there are one million vacancies and seven million adults out of work for various reasons, the DWP outlined the details of a disability benefits reform aimed to “make sure it better meets the needs of disabled people in Great Britain”.
This change includes removing the work capability assessment and supporting claimants to work without fear of losing their financial support.
However, Sarah Williams, head of employment at Taylors Solicitors, says the government’s proposal opens a great debate as “small financial incentives, pressure and penalties for jobseekers may not succeed”.
She warns that having disabled and long-term sick people return to work reluctantly can create issues on the basis of the Equality Act, as “many employers struggle to provide support and make reasonable adjustments”.
Asked whether the onus on employers to provide targeted support to such employees would increase, Nick Pahl, chief executive of SOM, answers with a definitive “yes” – especially for medium and larger businesses, as “the government is signalling it may intervene in the future unless they see employers investing in workplace health”.
From an employment law perspective, Williams says “the proposals may be more problematic than the government realises, which could result in increased employment tribunal litigation”.
Regarding the growing responsibility of occupational health professionals when bringing long-term sick back to work, Ruth Wilkinson, head of policy at IOSH, points out that many have specific requirements in the workplace to enable them to do their jobs, not just effectively but safely and healthily, adding that there will be a need for improved awareness of disability and illness and for clear strategies and policies to be introduced that demonstrate how businesses will support people. “This can only be done by prioritising a more robust system for employers to accommodate individual needs,” Wilkinson says.
Similarly, while noting it is “pleasing to see the government recognise the benefit of employer-led occupational health services”, David Williams, head of group risk at Towergate Health & Protection, says more needs to be done to support employees and ensure their physical and mental health is maintained.
For instance, an approach “providing employee benefits for the masses has a better impact than tax breaks for a select few”, he says, while adding that the right employee benefits, group income protection, private medical insurance and cash plans all directly aim to reduce illness in the workforce – “and we’d encourage employers to look at these if they want to retain their workforce and be seen as an employer of choice”, says Williams.
Extension of childcare funding for working parents
Moving on to another group that the government wants to encourage back to work, Hunt announced that 30 hours of free childcare would be available for every child over the age of nine months with working parents by September 2025.
This will be introduced in phases, with 15 hours of free childcare for working parents of two-year-olds going into effect in April 2024, and for working parents of children aged between nine months and three years in September 2024.
Childcare in the UK is among the most expensive in the world according to data from the OECD, with only Slovakia and Switzerland more expensive, and the rising cost of childcare has widely been seen as a deterrent for some parents to go back into work or back full time.
Hunt said if we truly wanted to remove obstacles to employment, we needed to reach out to parents of young children as childcare was still simply “too expensive” for them, and that he didn’t want any parents of children under the age of five to be prevented from working if they wanted to, because doing so would be “damaging to our economy” and would be primarily unfair to women.
Ben Willmott, head of public policy at the CIPD, says the boost to childcare provision is a potential “game changer” for working parents as it will enable many more working parents, particularly women, to return to work much earlier than they can currently. “This can help avoid the loss of skills and confidence that can be caused by spending too long out of employment and boost gender equality, as will the boost to wraparound care, but both schemes need to be properly funded to succeed,” he says.
However, Jane van Zyl, chief executive of Working Families, says that while the government’s strategy for increasing funding for childcare is encouraging because it is finally treating affordable childcare as a “vital component of economic growth”, the budget as it stands “falls short of delivering on the promise of a fully supported system from nine months to four-year-olds”.
Van Zyl adds that millions of parents and carers will have the flexibility, security and control they need to succeed at work if childcare is “properly subsidised” and combined with the measures of the flexible working bill, but says “much more still needs to be done”.
Catherine Foot, director of Phoenix Insights, agrees and says the government assistance with affordability must be combined with employer assistance in “offering more flexible work schedules for those with caring responsibilities who feel that leaving work is their only option”.
According to a study by Pregnant Then Screwed, three quarters (75 per cent) of mothers who pay for childcare say it no longer makes financial sense for them to work, and 870,000 mothers are unable to work because of childcare costs and availability issues.
Lauren Fabianski, head of campaigns and communications at Pregnant Then Screwed, says that to enable mothers to work more hours, and in some cases to work at all, we need childcare to be both “affordable and available and this needs to happen by increasing funding to bridge the current funding gap”.
Fabianski added that if the implementation of these new policies is properly funded, employers will benefit as more mothers will return to work and increase their hours. “There is huge potential for mothers who are desperate to work and can't afford to currently, but now we need to see the successful and thoughtful rollout of the plans, and only then will the benefits trickle down to employers,” she says.