The new Chancellor, Kwasi Kwarteng, announced a number of employment measures in the mini budget last week. 

The measures are set out in the Government's Growth Plan 2022 and include certain key changes:

  • NICs and the Health and Social Care Levy: the 1.25% temporary rise in national insurance contributions which came into force on 6 April 2022 will be reversed from 6 November 2022.  The Health and Social Care Levy due to be payable from 6 April 2023 has also been cancelled.
  • IR35: The off-payroll working reforms of 2017 and 2021, known as IR35, will be repealed from 6 April 2023.  This means that from that date, workers providing their services via an intermediary, e.g. a personal services company, will once again be responsible for determining their own employment status and for paying the appropriate tax and national insurance contributions.  The IR35 rules have created a lot of additional administration and uncertainties for businesses concerned about the implications of falling foul of the rules and being responsible for additional tax and NICs.
  • Bankers' bonus cap: The Prudential Regulation Authority will remove the bonus cap on bankers' pay following a post-Brexit review of City rules.  The cap was introduced in 2014 as part of the EU legislation on pay reforms designed to curb excessive risk being taken by bankers and it currently operates to limit the bonuses to 100% of fixed pay or double that with shareholder approval.  Critics have argued that uncapped bonuses lead to excessive risk taking.  The Chancellor, however, maintained that the cap leads to higher base pay which drives up banks' fixed costs and it is a deterrent for attracting key global talent to the UK.
  • Industrial Action: The Government will introduce legislation to ensure minimum service levels can be put in place for transport services.  This is one of the Conservative party manifesto pledges and draft legislation to this effect was originally introduced in the Queen's Speech in December 2019.  In addition, the Government will legislate to require trade unions to put pay offers from employers to a members' ballot to ensure that strike action can only be taken once negotiations have genuinely broken down.  These new measures follow two pieces of legislation which came into force in July 2022.  The first, allowed businesses to hire agency workers to cover staffing gaps caused by official strike action or industrial action.  Those new regulations are currently the subject of judicial review proceedings.  Secondly, the Government increased the maximum damages that can be awarded against a union for unlawful strike action.  For the biggest unions (100,000+ members) the maximum damages has risen from £250,000 to £1 million.
  • Income Tax: The Government has announced that it will abolish the additional rate of income tax of 45% on annual income above £150,000 from 6 April 2023.  In addition, the scheduled 1% reduction in the basic rate of income tax which was due to come into effect on 6 April 2024 has been brought forward by a year.  From 6 April 2023 the basic rate of income tax will therefore be 19% (rather than the current 20%).

Key contact

Katherine Moore

Katherine Moore

Knowledge Lawyer, Employment

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