The ‘back to work’ budget: what does it mean for HR?

Today, the Chancellor of the Exchequer, Jeremy Hunt, presented his Spring Budget to parliament.

According to Hunt, he announced “a landmark Conservative reform” under a “comprehensive plan to remove barriers to work.”

But what does this ‘back to work’ budget mean for HR? HRreview has gathered the relevant information and statistics, along with expert commentary and analysis.

Reforms to the childcare system

“For many, a career break becomes a career end,” Hunt strongly stated. He outlined that almost half of non-working mothers would like to work if they had childcare.

As a result, the chancellor announced a series of reforms that are aimed to kick-start the journey of getting mothers back into the workforce.

He stated that he will increase the funding by £204m to nurseries from this September. This is due to rise to £228m next year, meaning there will be a 30 percent average increase in the two-year-old rate.

Hunt also announced that parents on Universal Credit will now receive up to £951 for one child and £1,630 for two children per month. This will now be paid upfront.

Also, 30 hours of free weekly childcare will be given to cover children below the age of three. Whilst this will only apply to households where both parents are working, it will eventually cover all children from the age of nine months, Hunt says.

Regarding those working in the childcare industry, Hunt says he is piloting incentive payments of £600 for childminders joining the sector. That number will rise to £1200 if they join through a childminder agency. These reforms follow the fact that the number of childminders decreased by 9 percent last year.

Turning his focus towards schools, it was announced that funding will be given to schools and local authorities to provide before and after-school care. The focus on wraparound care aims to allow parents to drop their children off between the hours of 8am and 6pm. Hunt said that this will be achieved by September 2026.

Changes to disability benefits

Hunt stated that there are plans to abolish the work capability assessment and to separate benefits entitlement from an individual’s ability to work. This aims to enable disabled benefits claimants to seek work without worrying about losing financial support.

It was also announced that the government will spend up to a maximum of £4,000 per person under a new voluntary employment scheme to help up to 50,000 individuals locate jobs.

Wellbeing funding

Hunt has allocated £400m in funding to increase the availability of mental health and musculoskeletal resources for workers.

What about pensions?

The pensions lifetime allowance is to be abolished, which was previously set at £1.07m.

The chancellor also announced that the pensions annual tax-free allowance will be increased from £40,00 to £60,00.

“This is a seismic change to the pension tax landscape, reversing a decade of declining lifetime allowance which discouraged higher earners from saving,” says Andrew Tully, Technical Director at Canada Life.

“However, tax-free cash will be limited for most people to the current maximum level of £268,275. This caveat means the abolition isn’t quite as positive as it first appears. While the harsh 55% LTA tax is being removed, benefits above the tax-free cash level will be subject to income tax. Allowing those with suitable protections to receive higher amounts of tax-free cash doesn’t simplify pensions as much as we would have hoped, potentially retaining layers of complexity.”

Universal Credit sanctions need to be ‘applied more rigorously’

Addressing individuals looking for work who are on Universal Credit without a health condition, Hunt says that sanctions will be applied more rigorously to those who fail to meet strict work-search requirements.

‘Game-changing’ for skills shortages 

Terry Payne, Global MD of recruitment agency, Aspire, commented: 

“This back-to-work Budget has many of the ingredients needed to ease the skills crisis, which is stifling business and economic growth. We said the Chancellor would need to get creative and, in many ways, the government has thought outside the box.  

“Major reform to free childcare allowance is potentially game-changing – a catalyst for those returning to work. Doing more to help parents, over 50s, those with disabilities and many others get back to work is the right move at the right time. Employers will also benefit from access to a wider and increasingly diverse pool of talent. 

“That’s not to say the government has knocked it out of the park. Like job seekers, employers need support, too. If we want to see more businesses hire, then the current rate of Employers’ National Insurance – effectively a tax on employment – needs a rethink.”

Ignoring IR35 ‘smacks of irony’ in ‘back to work’ budget

Insurance provider for the self-employed, Qdos CEO, Seb Maley, commented:

“Childcare reform aside, anyone working for themselves has a right to be deeply disappointed by this Budget. There are 4.3m self-employed people in the UK who contribute hundreds of billions to the economy every year. Why isn’t more being done to support them?

“The Chancellor completely ignored the IR35 legislation in his speech. This smacks of irony in a so-called ‘back to work’ Budget. The government wants retirees to return to work but won’t address the issues plaguing IR35 reform. These tax changes forced many freelancers and contractors into early retirement, at a huge cost to the economy.  

“Fix IR35 and retirees might be attracted back, solving skills shortages and boosting the economy. It’s a simple solution to what is a massive problem.” 

Are the childcare reforms promising enough?

Matt McDonald, employment partner at law firm, Shakespeare Martineau, said:  

“The promise of more free childcare for parents with children under two is a step in the right direction. With the cost-of-living crisis putting many families under pressure, it is vital that they receive proper support that removes barriers that may have otherwise stopped them from getting back to work.  Unfortunately, the cost of childcare in the UK is such that for many lower-paid workers there has been no financial benefit in going back to work before their children turned three. 

“This announcement is set to bridge that gap between the end of parental leave and the start of funded nursery care for three and four-year-olds, helping parents to get their careers back on track at a faster pace than they may have been able to before. With the world of work crying out for skilled employees, this is a first step to ensuring that workers aren’t unnecessarily forced from their chosen careers before time.”

Encouraging the over 50s to return and remain in the workforce is crucial

Michael Page’s UK & Ireland Managing Director, Doug Rode, comments on the ‘back to work’ budget:

“Today’s Budget announcement reinforces the value to the economy of over 50s workers. By abolishing the lifetime allowance for pension savings, the Government is hoping to ensure these highly skilled workers decide to remain in the workforce. As Mr Hunt noted, over 50s are a gold mine of talent that can not only play a huge part in restoring the economy but can also impart their unique and highly valuable skills, knowledge and experience on the next generation of workers.

“Whilst the Chancellor has lit the way today with the launch of ‘returnships’, the onus is equally on businesses to step up and recognise the importance of re-engaging this group of talent. Organisations can bolster the prospects for workers over 50 by offering tailored training and continuous learning opportunities – particularly around digital skills, where older workers (especially those who may have stepped away) may worry that their digital capabilities aren’t up to scratch. They should also be promoting an inclusive environment, where workers can feel valued for the experience that they bring. Offering flexible benefits that allow people to build packages that suit their stage in life – for example, the ability to top up pensions and buy holiday allowance – could also help attract this group.

“Businesses should be under no illusion that the candidate shortage will continue without a focus on new and innovative ways to engage talent. The workforce has gone through profound changes throughout the past three years and talent attraction and retention strategies really need to reflect that.”