Budget 2021: Working our way out of lockdown

After the turbulence of the last 12 months, Chancellor Rishi Sunak seemed keen to avoid any big surprises with his 2021 Budget.

Many of the most significant announcements, such as the extension of the Coronavirus Job Retention Scheme, were previewed well in advance – giving companies as much time as possible to consider plans for the year ahead as we emerge from national lockdown.  

That said, the Budget did feature some key points which could have a big impact on businesses and payroll teams as we enter a cautious period of economic re-opening.

Coronavirus Job Retention Scheme

As expected, the government has extended the Coronavirus Job Retention Scheme through to September 2021, with the government’s support tapering to include a company contribution of 10% in July, which must increase to 20% in August.

For the most part, administering the scheme in this next phase will follow patterns established for managing the scheme in 2020, including the previous tapering period.

However, given how long the scheme has run, and how many people have entered, exited and re-entered the scheme – it’s clear the government needs to provide an update to the reference points and qualification criteria for determining who’s in or out of the scheme.

Accounting for new hires and forming accurate wage estimates will require careful calculation, especially as employees first reported on the payroll between 31^st October 2020 and 2^nd March 2021 can now be furloughed from 1^st May.

The government has said that details for how to calculate for these employees are coming in “due course”. But with under two months before the next milestone, the sooner this guidance arrives, the better. Accurate payroll calculations and projections will hinge on how the government provides clarity. We’ll be watching closely and updating our Knowledgebase article on the Coronavirus Job Retention Scheme as more develops. 

Accounting for increased national living wage

The government also announced a 2.2% increase to the national minimum wage for basic rate workers, to £8.91 an hour from 1^st April 2021. While this increase was below expectations set out in last year’s Budget, it is still set to apply to millions of workers, including 23- and 24-year-olds for the first time, and will have a serious impact for many large-scale employers.

Businesses with high numbers of basic rate workers will need to quickly adapt their forecasts to account for the new rate. This will add yet another layer of complexity to the calculation of payroll in the coming months.

New incentives for businesses looking to hire and re-open

Otherwise, the Budget was notable for the introduction or expansion of schemes aimed at granting support for businesses as we enter a period of economic recovery.

In the Budget, Rishi Sunak unveiled £126m for more traineeships and raised incentive payments for firms taking on apprentices to £3,000. We know that these schemes are vastly underutilised and offer companies real opportunities to develop and retain talent. As the impact of a long lockdown reverberates through every industry, firms will have few reasons to miss out on economically sound schemes like these.

The government announced £5bn in restart grants for retailers and other businesses that were forced to close due to coronavirus, £6,000 for non-essential outlets reopening in April and £18,000 for gyms, personal care providers and other hospitality businesses.

This aid is set to be vital to getting many businesses back on their feet – but that process will also have big implications for payroll and HR. HMRC will pay careful attention to how staff are brought back from furlough (to ensure no one is counted twice), as well as to how companies re-expand their workforces, with new staff or new trainees and apprentices.

A challenging road ahead, but with an end in sight

In many ways, the Chancellor’s Budget was similar to the Prime Minister’s recently announced plan for opening up the country in stages. While it’s certainly exciting to have dates to look forward to, the payroll and HR industry faces challenging months ahead.

If you have any questions about how we can help your business in the coming months, don’t hesitate to get in touch.