7 ways that a Tory majority will affect employers
Other than the obvious change – being life outside the EU – the Tory manifesto makes a number of other promises to the British people.
Below are a number of key Tory promises which may, if implemented, have a significant impact on employers.
1. Increase the National Living Wage
This has been a Tory promise since they were initially elected back in 2010, when they announced an increase in the National Living Wage to bring it in line with two thirds of average earnings, currently forecast at £10.50 per hour. This change is set to result in an average increase of £4,000 per year for 4 million people by 2024.
People in the lowest paid jobs should benefit from this increase, which is a clear benefit. However, there will be an additional cost (estimated at £16 billion) for all businesses employing staff on the National Living Wage. Smaller businesses and those in certain sectors such as social care, who are already under significant financial pressures, may feel the most impact.
There is also some concern that employers who cannot afford the increases may simply decide they cannot pay the Living Wage, with lower-skilled, more vulnerable workers feeling unable to turn the work down at a lower rate. There is a greater risk of this happening with smaller, unregulated businesses.
2. Increase Employment Allowance for small businesses
Currently, small businesses are entitled to apply for an Employment Allowance of £3,000, which is taken off employer National Insurance. The Tories say that the Allowance will be increased and will result in a tax cut for half a million small firms. The amount of the increase has not been specified.
3. Commitment not to raise income tax, National Insurance or VAT
The manifesto goes further, with the Conservatives saying they will also raise the National Insurance threshold to £9,500 next year with an ultimate goal of £12,500 tax free earnings.
In principle this will protect the lower-paid workers as they will receive more of their earnings free of deductions.
4. Establish a new £1 billion fund for “high-quality, affordable childcare”
Recognising the additional responsibilities involved in raising a family, the Tory manifesto pledges to help alleviate the “heavy burden” the cost of childcare places on families, and “to give parents the freedom, support and choice” to decide how to look after their children, by investing in this new fund to improve available childcare.
In theory, improving childcare and making it more flexible should free up workers and allow them to work longer hours. This could have both positive and negative impacts on an employer, depending on the type of work done and the contracts in place. It may make it more difficult for parents to say ‘no’ to hours offered, as the pressure of accessing the flexible childcare will rest on their shoulders. On the flipside, there is a clear positive to this proposal as flexibility is often considered a luxury which parents do not have.
5. Immigration – an “Australian-style points-based system” is to be adopted
We have known for a while that the Tories intended to introduce an immigration system similar to that used in Australia, which was designed and implemented there to increase immigration. However the government promises that “overall numbers [of migrants] will come down” under this system.
It states that “most people coming into the country will need a clear job offer”. Certain skills are to be prioritised, for example people with a good level of English and good qualifications. The government believes that this system will enable us to keep track of who is coming in and out of our country, and ensure that “British people are always in control”.
We will have to wait and see how the system works in practice.
For a pre-manifesto review of the system and its application in the UK, see the article we wrote earlier this year.
6. Review on pensions taxation – a focus on the NHS
The new government is to hold an urgent review within the next 30 days to consider the application of the annual allowance taper under the NHS Scheme. It will also conduct a “comprehensive review” on a loophole that adversely affects people subject to net-pay arrangements.
In addition, the government intends to progress the Pensions Scheme Bill, it says to protect pensions from “being plundered by reckless bosses” and establish a “new style of pension scheme which is more sustainable for workers and employers”.
7. Protection for those in low-paid work and the gig economy
The government intends to:
- Create a single enforcement body to “crack down on employers abusing employment law”
- Create a right to request a “more predictable contract”
- Implement “other reasonable protections”
It is unclear what the government means by a “more predictable contract” and whether this could lead to a less flexible workforce. For some sectors and industries, this simply is not feasible and will not be a welcome change for many employers.
The less clear commitments which the Tories have made include the following:
1. Include IR35 changes as part of the review of small business taxation
There is a fair amount of scepticism around the party’s intention to review IR35 given their history with the legislation (initially pledging to have it scrapped then failing to do so when elected). It may also be telling that the party failed to mention the changes in their manifesto: it appeared to be an afterthought stated by Sajid Javid during the election campaign.
There have been calls for the upcoming changes to IR35 (off-payroll working) to be scrapped with people worrying about the affect it will have on the self-employed. However these concerns do need to be balanced against the current situation, where the lack of ability to regulate the self-employed means a significant amount of tax is simply not being paid.
2. Flexible working to be the default
The government has said it will consult on making flexible working the default position, unless employers can demonstrate “good reasons” not to.
It is unclear what might be viewed as “good reasons”, but if implemented, it will be an additional burden for employers where flexible working is not seen as a workable option for specific roles.
3. Extended leave for neonatal care, and make it easier to take paternity leave
The government intends to legislate to allow parents extended leave for neonatal care, and to find ways of making it easier for fathers to take paternity leave.
Any changes here will be welcomed by employees and, depending on the extent of the changes, are unlikely to significantly affect employers.
4. Will look to improve the working of the Apprenticeship Levy
The government is yet to elaborate on how they intend to do this, but it is clear that the current framework is not achieving its objective of increasing apprenticeship numbers.
Realistically, it is very unlikely that all of the above commitments will materialise, but the Tories say they intend to implement every one of them. It is therefore worth keeping an ear to the ground, or an ear to your lawyer, in the event that these changes are brought in and you need to evaluate how they affect you and your business.
If you have any queries regarding this article, or are concerned about any of the above and the potential impact on you and your business, please do not hesitate to contact one of our expert Employment Solicitors.