Kickstarting your business – the changing face of the Covid-19 workforce

Fri 11 Sep 2020

As the Government support provided to UK businesses during the initial months of the pandemic is gradually withdrawn (CJRS support comes to an end on 31 October), businesses now need to look at different ways to grow their business, both in the short and long term.

People and Workforce design – managing cost and driving your business forward

To begin, there is a need to focus on what support is available and how adapting the People and Workforce design aspects can provide cost savings as well as cultivating new energy to drive your business forward.

We set out some key areas to be aware of and some of the broader considerations that go with these:

1. CJRS Bonus

For those put on qualifying furlough and are still employed (and not under notice of redundancy/termination) as at 31 January 2021, the Government will pay employers £1,000 for each furloughed worker in February 2021, providing they have returned to work and the employee is earning at least £520 per month.

Some large UK businesses have already publicly said that they will not claim this bonus from the Government, however, many will find this payment critical in helping to protect jobs. Details on how this can be claimed will be announced nearer the time likely via a Government online portal.

Additionally, employers may want to think about “sharing” this bonus with their workers, regardless of whether the worker was furloughed or not. Any “bonus” or additional payment made to an employee will be subject to income tax and NIC. However, some more tax-efficient options may include:

• Putting additional employer contributions into an employee’s pension scheme;
• Paying employees who are regularly working from home £6 per week to help with the additional costs (this is a tax/NIC free payment);
• Making discretionary non-cash gifts for Christmas/birthday etc up to £50 in value;
• Providing access to electric vehicles and bicycles; and
• Giving employees additional annual leave entitlement.

2. The Apprenticeship Levy

The Apprenticeship Levy has been around for over 3 years now, however, it has not had the desired impact on apprenticeship numbers that the Government was hoping for.

The Apprenticeship Levy is a tax on employers of 0.5% where the total paybill in a tax year exceeds £3m. This tax is then placed into an online digital account to be drawn down on to pay for qualifying apprenticeship training in England (not Scotland, Northern Ireland or Wales as training is devolved). If not used within 24 months it will expire. When this is exhausted, the Government then co-invest and provide a 95% subsidy to the training costs.

Therefore, engaging apprentices of all ages and grades can be cost-effective for a business and helps with structuring a reward training proposition internally, particularly when aligned with a reward package which increases with progression. By thinking about what training and development you offer and considering whether these could be provided via an apprenticeship, it can make employees more aware of the skills they are developing, help them progress, as well as managing costs more effectively.

In addition, there are other cost benefits of engaging apprentices:

• If an apprentice is under the age of 25, the employer will not pay any employer NIC on their pay (providing they are paid less than the Upper Earnings Limit (currently £50,000 per annum); and
• The Chancellor announced that an additional £2,000 (or £1,500 if the apprentice is aged 25 or over) will be paid to employers who take on new apprentices in England between 1 August 2020 – 31 January 2021. This is on top of the existing £1,000 employers already get if they have employed an apprentice aged between 16-18 (or under 25 and has an education, health, and care plan or has been in the care of their local authority).

It is therefore worth thinking about how you wish to design and utilise apprenticeships in response to Covid-19. Taking the time to consider this can have positive impacts on workforce capability, business focus and employer costs during a time when adaptation and flexibility are vital.

3. Traineeships

A traineeship is a skills development programme that includes a work placement. It can last from 6 weeks up to 1 year.

Traineeships help 16 to 24-year-olds, or 25-year-olds with an education, health, and care plan, get ready for an apprenticeship or job if they don’t have the appropriate skills or experience.

The Government have announced that £1,000 incentive payments will be made to employers who make traineeships available. However, there are no current details on this other than the information contained here.

4. Kickstart Scheme

The Kickstart scheme provides 6-month placements to those aged 16-24 who are claiming Universal Credit and are at risk of long term unemployment across England, Scotland, and Wales (not Northern Ireland). The first placements are likely to be available from November.

Kickstart will be made available via the Job Centre for those individuals who qualify. It is not an apprenticeship, but participants may move on to an apprenticeship at any time during, or after their job placement.

The Government will provide the employer with funding for 100% of the relevant National Minimum Wage for 25 hours a week, plus associated employer National Insurance contributions and employer minimum automatic enrolment contributions. The employer can choose to top up this wage should they wish.

The Government will also give employers £1,500 per job placement to help with setup costs, support, and training and funding is only available following a successful application process.

Applications must be for a minimum of 30 job placements. However, if an employer is unable to offer this many job placements, they can partner with other employers.

Kickstart is intended to give young people an opportunity to build their skills in the workplace and gain experience to improve their chances of finding long term work. It will also help employers manage their costs and enable businesses to adapt their training and organisational structure.

This scheme, which will be delivered by the Department for Work and Pensions will initially be open until December 2021, for those in Scotland, England, and Wales, with the potential to be extended.

5. IR35 & engaging services off payroll

Alongside the Government employment opportunities highlighted above, as employers look to recover and move forward, the need for flexible support, specialist consultancy advice and independent assistance could prove vital to how the business performs in the future.

Given this, employment status and IR35 remain key risks to manage. The changes being introduced from April 2021 (delayed from April 2020) mean that the end user will need to assess the employment status of the Personal Service Company (PSC) they engage.

If HMRC successfully challenge payments that have been made without deduction of PAYE and NIC, the end user will be liable for the PAYE and NIC liability, as well as any penalties. Currently, the PSC is liable so this does represent an additional risk. The change due to be introduced from April 2021 means that the risk to the end user of engaging individuals directly or via PSCs effectively becomes a level playing field.

Whilst this creates risk and further administration, it is important to stress that engaging individuals off payroll either directly as individuals or via PSCs can still take place and could make a huge difference to your business.

Next steps

In line with the above, reward structure including salary, pension, holiday, non-cash benefits will be key to review to ensure any changes fully align the reward and development culture you wish to embed and be known for.

For more information, please contact Employment Tax Director Ian Goodwin at Ian.Goodwin@mazars.co.uk