Government reforms (1): Budget 2018

budget breakdown

The Chancellor presented this year’s budget at the end of October 2018. Key announcements for HR/employment law are:

1. National living wage and minimum wage increases:

The following National Minimum Wage (NMW) rates come into effect in April 2019:

  • 25 years and above (the National Living Wage):  from £7.83 to £8.21 per hour;
  • 21-24 year olds:  from £7.38 to £7.70 per hour;
  • 18-20 year olds:  from £5.90 to £6.15 per hour;
  • 16-17 year olds:  from £4.20 to £4.35 per hour; and
  • Apprentice rate: from £3.70 to £3.90 per hour.

2. Apprenticeships:

The Government announced that it will introduce a package of reforms to strengthen the role of employers in the apprenticeship programme, so they can develop the skills they need to succeed. As part of this the Government will:

  • make up to £450m available to enable levy-paying employers to transfer up to 25% of their funds to pay for apprenticeship training in their supply chains;
  • provide up to £240m to halve the co-investment rate for apprenticeship training to 5%;
  • provide up to £5m to the Institute for Apprenticeships and National Apprenticeship Service in 2019-20, to identify gaps in the training provider market and increase the number of employer-designed apprenticeship standards available to employers. All new apprentices will start on these new, higher-quality courses from September 2020; and
  • work with a range of employers and providers to consider how they are responding to the apprenticeship levy across different sectors and regions in England, as well as the future strengthened role of apprenticeships in the post-2020 skills landscape.

3. Intermediaries (IR35) and the public sector:

 The Government has announced that from 6 April 2020 it will extend the off-payroll working rules (IR35) (which currently apply to public sector bodies; see our updates here) to certain medium-sized and large private sector businesses.

However, the Government will carry out a further consultation in 2019 in order to refine this extension and draft legislation will be published in summer 2019. To reduce the burden of this change, the extension will not apply to “small businesses” (fewer than 50 employees, a turnover of under £10.2m, and total assets of £5.2m or less). Therefore, where a small business engages a worker, responsibility for deciding whether IR35 applies and paying tax and NICs, will remain with the ‘personal service company’ intermediary.