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Looking ahead to 2016

The party’s over…

How was the holiday period for you? Restful and peaceful I hope, with a bit of time for reflection, and hopefully a fond glance back and a glass or two raised to a successful 2015. But now we are all back, the days will slowly get longer, and it’s a time for a look ahead to what 2016 holds for employers. Unfortunately the road is not without bumps, with a series of government initiatives beginning to bite, particularly on the region’s SMEs. There is a very clear pattern emerging – employers are being asked to do much of the heavy lifting to reduce the Welfare Bill, and here is a flavour of what is to come.

First up is auto-enrolment. This has been with us for a while now, thus far affecting mainly larger employers, but throughout 2016 those with fewer than 30 employees will be automatically enrolling workers into a pension scheme. For those who don’t already have a company scheme this amounts to an additional 1% on the paybill for employees not opting out (and only about 12% do), escalating to 3% over the next few years. Auto-enrolment also involves a fair bit of admin and there are penalties for getting it wrong, so if you are due to stage in the next 6 months hopefully you will have already started planning. If not, you best get your skates on. BHP can help you.

Hot on the heels follows the National Living Wage, which takes effect from 6 April 2016 and will see all workers aged 25 and over earning at least £7.20 an hour, with an intended increase to £9 by 2020. An anticipated 6 million workers will be affected, with the burden falling disproportionally on SMEs – according to the Regulatory Policy Committee 9.7% of employees in small firms will benefit, compared to 5.8% in large firms. Sectors operating on already tight margins, such as retail, hospitality and care, will be particularly hard hit, and without sizeable increases in prices, productivity or both it is hard not to see jobs being squeezed.

Another more subtle cost increase in April is actually the postponement of a long awaited decrease; we had been expecting the diesel surcharge on company cars to be removed, as we were promised this over 3 years ago. It will now remain in place until 2021, raising £1.36bn for the Exchequer – highlighting just how many diesel company cars are on our roads. Many companies will have made recent car decisions based on the expectation that the diesel surcharge was going – this delay will cost the driver of a Ford Mondeo an extra £155 per annum, and their employer £107.

Moving on to 2017, and we will see the introduction of the Apprenticeship Levy. This is a new payroll tax (0.5% of the paybill on payrolls over £3m) which will raise some £12bn over the course of the parliament. This measure has been trumpeted as only affecting large employers – but it depends how “large” is defined. There are approximately 1,000 companies in Yorkshire and Humberside with a wage bill of £5m or above, and all of these will certainly be affected.

No doubt the majority of employers will have budgeted for all of the above and, as always, forward planning is key. With the cost of employing people set to rise, perhaps now is the ideal time to take a step back and take a look at overall employee reward – the careful introduction of flexibility in how workers choose to be paid can have a powerful retention effect, as well as helping to keep down the overall costs of being an employer. If you would like to chat through the various options we would love to talk to you.

 

Nick Davies sign off