The ramifications for employee benefits of the change in government are only just beginning to be felt because of the raft of tax changes.
At one level the changes have come quickly, but at another level we urgently need even faster confirmation of any further changes the new government plans to make to the previous government’s proposals. This is largely because several are due to be implemented in April 2011.
Some tax changes announced by the Labour government will not change under the new regime, such as company car tax, reduction of tax relief on childcare vouchers, and the withdrawal of tax breaks on canteens run through flexible benefits or on a salary sacrifice basis.
Other previous announcements are currently under consultation, such as auto-enrolment (consultation to be reported on 30 September), pensions tax for high earners (draft legislation to be drawn up in the autumn), and a review of benefits run through trusts. It has been announced that the government is looking at imposing an annual allowance on pension contributions of £30,000 to £45,000.
As well as the incoming tax changes, there are several potential employment measures that will force widespread changes in working practices. These are worth bearing in mind when restructuring reward offerings to react to the tax changes mentioned above.
The removal of the default retirement age and the push for greater flexible working will be further catalysts to rethinking the 9-to-5, retire-at-65 mentality still prevalent in many organisations. The recession is already causing flexible working to be viewed as a useful business tool, and it is likely that the way it has been embraced will lead to a long-term change in working practices.
All these developments can be seen as either a burden of extra work for HR and reward professionals, or an opportunity to make radical, long-term changes.
On a completely different note, each time Employee Benefits runs a survey, we conduct a prize draw among our respondents. The winner for this month’s pensions research supplement is Adrian Furnell, group pensions manager, The AA/Saga, who wins £100-worth of vouchers.