Employee Benefits Future Strategy 2006 – Feature: HCI mirrors shifting work patterns

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Back in the late 1990s, the government was forced to face up to the fact that the UK was severely lagging behind the rest of the world in moving towards what it labelled an ‘e-economy’. Since then, through a combination of regulation, new infrastructure and tax breaks, broadband penetration has been increased to the point where 99% of the population can access broadband services, according to government figures.

Schemes such as the Home Computing Initiative – launched in 1999, but revamped in 2004 after limited success – have arguably helped increase home PC penetration by offering tax advantages to employees for buying through employers.

According to the HCI Alliance, an industry body working with the government to increase home access to the internet, about 700,000 people across 600 organisations will have taken advantage of the scheme by the end of 2005. But Vivien Quinn, director of the HCI Alliance, argues that there is still plenty of mileage in HCI, if the government wants to emulate the Swedish model and have internet access in more than 75% of homes. “When the scheme started, the UK government estimated 52% of homes had a PC. We reckon we have improved penetration so far by between 4% and 5%, so there is still some way to go in meeting the government’s goal,” she says.

Based on these figures, it appears that home access to broadband services is significantly lower than the 99% figure for the UK as a whole. The question is will government decide to invoke its tax and financial powers to extend the HCI package to include tax breaks for broadband take-up?

“People are often surprised when they discover that broadband is not included. But in 1999, when the legislation was made, broadband was a twinkle in the government’s eye,” Quinn admits.

As an employee benefit, however, not everyone is convinced this would work. Peter Thomson, director of the Future Work Forum at Henley Management College, says: “Rather than being a tax benefit, an employer might recognise if an employee works at home one day a week and agree to pay their broadband costs, in much the same way as a company would pay for a separate phone line into the house for business use.”

With the government keen to use tax breaks to promote its policies, might it dream up other initiatives, for instance based around take-up of digital television?

While the government is set on the UK switching from an analogue to a digital broadcasting system by 2012, Thomson does not think it will resort to employee tax incentives because the last people expected to take-up digital TV will be those in retirement and not work.

But Thomson does expect the government to introduce initiatives based around work-life balance.

Indeed, the government’s Work and Families Bill unveiled in November 2005 aims to extend the right to request flexible working from parents of children aged under six years to carers of adults.

It is possible that the government may also decide to introduce tax breaks around eldercare vouchers, just as they have done with childcare vouchers.

Given the government’s aim to reduce obesity levels in the UK, other candidates for possible tax breaks include benefits that promote fitness and wellbeing.

With this in mind the Fitness Industry Association has been lobbying the Treasury to stop health club membership being taxed as a benefit in kind where it is offered offsite as a perk by employers. Employee use of gyms at the workplace is not treated as a taxable benefit in kind.

It wants to see gym membership treated in a similar fashion to the government’s bike loan scheme. Although the scheme encourages fitness, the government was primarily concerned about reducing congestion when it introduced tax exemptions on the loan of bicycles.

“Where we might see more tax incentives is in the use of public transport, perhaps loans from employers to subsidise commuting by public transport or bicycles. Or there could be vouchers like those used in the childcare scheme and employees would receive these tax-free for commuting on public transport rather than driving.

“What is interesting is if the government starts encouraging more people to work from home, which would help people manage their home and work [lives], and benefit the environment,” says the Future Work Forum’s Thomson.

The ageing population and looming pensions crisis is likely to lead to changing work patterns as well as an extension to the retirement age. With this need to encourage employees to work until they are older, Thomson suggests that an income tax break for people working over a certain age could be introduced, although he admits that this would be an administrative nightmare.

Overall, the future trend in employee benefits appears to be more of the same. Labour has produced few major surprises since it came to power and very few industry commentators expect there will be any others during the remainder of its third term.