UK Budget 2023: Payroll and HR highlights 

Chancellor Jeremy Hunt has delivered the UK Spring Budget 2023. As the treasury brands this a ‘back-to-work budget’, what will the changes mean for payroll and HR? Cybill Watkins, Product Legislation Manager at Zellis, explains.

Lifetime pension allowance swept aside

The removal of the Lifetime Allowance for pensions was a bit of a surprise, despite hints it might expand to allow higher amounts of penalty-free saving. Instead, we now know that the allowance charge will end from April 2023, with the allowance abolished entirely from April 2024. And the annual allowance will go up to £60,000.  

The Treasury hopes that ‘these reforms will help ensure that high-skilled individuals such as NHS clinicians are not disincentivised from remaining in the workforce’. 

What it means for payroll and HR 

For employers, this raises the need to check for employees who had exceeded the allowance. Many will now need to be re-enrolled into the workplace scheme. 

Childcare funding expanded to nudge parents into work

The government will fund 30 hours of free childcare per week, for eligible working parents of children aged nine months to three years. 

This should alleviate the rising costs of childcare and encourage stay-at-home parents to rejoin the workforce. According to the Treasury: ‘many of these people report that they would like to work but cannot afford childcare’. 

In addition, childcare support via Universal Credit (UC) will rise by 50% and parents will get it upfront.

What it means for payroll and HR 

The scheme will roll out in phases from April 2024. An estimated 435,000 people fall into the target group. So, this could bring more parents of young children back into the workforce. Employers should consider their needs, which are likely to include flexible, part-time, and hybrid working. Remember that the funding covers only part of the full working week. 

Universal Credit is reliant on accurate Real Time Information (RTI) data, so this reinforces the need for timely payroll submissions.

New investment zones with National Insurance relief

Budget 2023 also heralded the creation of twelve special Investment Zones across the UK. These will enjoy relief on employer National Insurance Contribution (NICs) as part of the five-year tax offer.  

The areas are: the West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool.

What it means for payroll and HR 

The existing freeports have their own NI categories and rates. It is unclear whether the new Investment Zones will use these or receive new ones. For employers based in these areas, the ‘tax reliefs and grant funding’ might trigger opportunities to expand the workforce or invest in skills and training.

Flexibility focus for long-term sick and disabled people

The budget talks about helping long term sick and disabled people return to work, calling attention to flexible working legislation being considered by Parliament.  

The occupational health pilot study will be expanded for SMEs. The government will also launch a separate consultation on options for incentivising greater uptake of occupational health provision through the tax system. They will be reforming the statutory framework for flexible working to provide employees with a day-one right to request it.

What it means for payroll and HR 

Many will welcome the focus on flexibility. But it also raises a few questions. Some employers have already set a blanket return-to-office policy. Will it be compulsory for organisations to offer working-from-home or hybrid options to sick or disabled employees? Would this potentially be discriminatory to employees who don’t fit into that bracket? Employers will need to consider and work through the detail as it emerges. 

Returnership schemes for over-50s

In light of labour market pressures and the loss of older workers, the government is keen to tempt them back. So, the returnership scheme is effectively an accelerated apprenticeship to train and upskill over-50s. This will involve work academy programme placements and skills bootcamps. 

What it means for payroll and HR 

This could be a great opportunity for employers to harness the increasingly recognised benefits of hiring older workers. But much of the detail is still to be confirmed, particularly whether there will be different minimum wage rates for these older apprentices. Also, will training costs be covered by the Apprenticeship Levy? Will the training involve current apprenticeship courses, or will new ones be created? Watch this space.

Will Budget 2023 trigger a mass return to work? 

The Treasury’s sights are clearly set on boosting the depleted post-pandemic workforce and jump-starting the economy. While the measures are likely to have some impact, just how much remains to be seen in the coming months and years.

Discover more legislation and compliance resources here.

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*Red box image courtesy of HM Treasury (Contains public sector information licensed under the Open Government Licence v3.0.)