By Mike Bartlett, Founder of Travel Accounts
It is hard to deny that our Social Care has been grossly underfunded by successive Governments for years. If we weren’t aware of it before, the Pandemic has shone a bright spotlight on how our NHS and Social Care services are creaking at the seams.
However, the recently announced Health and Social Care Levy is causing a lot of concern for businesses of all sizes, in all sectors.
The simple truth is that these services need extra funding and with the Government running a sizeable deficit, significantly worsened by the pandemic, a further tax rise seemed inevitable. The issue as much as anything is the timing.
This is at a time when the news is filled with stories of utility companies going out of business due to sky high wholesale gas prices, which has a direct impact on costs for businesses. We’re now being warned of empty shelves for Christmas down to shortages of workers in the transport industry, no turkeys and livestock being culled because of low capacity in abattoirs, the result of a lack of international staff and service industries across the country struggling to find employees for lower paid roles causing businesses to shut.
Due to record high levels of unfilled vacancies, employers are already having to deal with wage inflation, at the same time the hospitality sector has seen its VAT relief come to an end and corporation tax is increasing across the board in April.
Whilst VAT is added to sales and corporation tax is applied to profits, the Health and Social Care Levy is applied regardless of profitability. Meaning businesses that are already struggling with the economic shock caused by the pandemic, are likely to be hit the hardest.
What can employers do?
This is the million-pound question.
- The first and perhaps most obvious course of action is to seek tax advice.
The announcement in September was not clear about how the initial temporary rise in NICs is going to be applied to Class 1A or Class 1B NICs on Benefits in Kind. However, employers should review their Salary Sacrifice arrangements to ensure they are applying these in the most effective way.
- Employers also have to collect the tax for HMRC, therefore they need to consider the impacts to HR and payroll systems to ensure these are updated accordingly.
- Employers should also consider communications, employees will see a reduction in their net pay, employers need to explain this ahead of time, to ensure employees are prepared.
This could be a good time to highlight employees’ Total Reward, to demonstrate to them ways they can reduce the impact, but also try to address calls for pay rises, by demonstrating the full value of their Reward package over and above Salary.
Implementing a live TRS can help to provide the context around this, and can cost less than the cost of replacing one member of staff.
- Employers need to get creative, use employee benefits and Incentives to help provide low-cost options that can help employees get more for their money.
- Employers need to factor this new tax into ongoing Labour budgets and consider benchmarking exercises to ensure they remain competitive to attract and retain the best talent.
In summary;
Whilst something was needed, the Health and Social Care Levy is going to cause employers a big problem, and it is unlikely to address the real issues impacting the Social Care Industry particularly the shamefully low wages of front-line carers.
It adds yet more costs to businesses struggling to recover and will make it even harder to compete in one of the toughest recruitment markets for an exceptionally long time. However, it is here, and employers can make changes to help themselves.
Employers face a significant challenge to attract and retain the best talent, whilst minimizing wage inflation.
The good news is that, for the first 12 months, the increase will affect NICs, an area where employers have been implementing tax efficient strategies for a long time. To stand any chance they will need to get creative, ensure benefit strategies are as effective as possible, that they address employees’ actual needs, and communicate regularly with employees to ensure they really understand the value of their Total Reward.
Holidays are one of employees’ biggest expenses, but they are vital to their wellbeing. Implementing Travel Accounts helps make them more affordable, increasing employees’ emotional, physical and financial wellbeing.
Travel Accounts make people happier, healthier and more productive. Get in touch to see how we can help.
Article written by Mike Bartlett, Founder at Travel Accounts.
