6th April - the day the law broke industry's back?

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Senior Employment and Skills Policy Adviser

It feels like just yesterday that I was talking about the cumulative costs to businesses. At the time I was talking about changes to holiday pay, pensions auto-enrolment and more recently the introduction of the National Living Wage.

However, the 6th April 2017 is fast becoming the date many businesses have been preparing for…or should I say…fearing. Three big ticket items are now in force and so I pose the question – could these be the laws that break industry’s back?

Apprenticeship Levy

AppLevyFacts

What is it?

A new Levy (tax) on all UK businesses who must pay 0.5% of their pay bill on a monthly basis to HMRC. There is a £15,000 allowance to offset the cost. This should mean that only companies with over £3m pay bill per year pay in but rules around connected companies could mean lots more companies are in scope (and our report found they are!). In return for your Levy payments employers receive digital funds which they can then spend on apprenticeships training and assessment. The funds have various restrictions however, such as only lasting 24 months and being subject to a cap depending on the type of apprenticeship being delivered.

Oh and although the Levy (tax) is UK wide, you only get back in digital funds the English fraction. So if you have employees who live in Scotland, Northern Ireland or Wales you won’t actually get back what you put in.  

What do we think about it?

Regular blog readers will be well informed of our views on this, but to recap….

We see the Levy as a blunt instrument that could potentially sacrifice quality for quantity. While manufacturers have plans to increase engineering apprenticeship numbers, look at apprenticeships in other parts of the business and use the Levy to boost the skills of their existing workforce, a third of companies see no benefits from the Levy, and view it nothing more than a tax.

And with such hefty bills to pay and restrictions in place, 75% of manufacturers are concerned they won’t get back from the Levy what they put in. Employers are also concerned about the time scale for implementation and who wouldn’t when this has gone from idea to full blown policy reform in two years, how they are going to absorb the cost within their business and certainty about future funding rates and rules (is it a good time to reveal the funding guidance is only applicable for a year?)

It is a fundamental policy reform and one that needs to evolve over time – with some immediate action required also. More on that from our latest report – Lifting the lid on the Levy.

Gender Pay Reporting

Gender-pay

What is it?

Employers with over 250 employees will have to report their gender pay gap. Not just a single metric, oh no – 6 pieces of information! Employers in scope will have until 4 April 2018 to publish their gender pay report. Once they’ve made their first report they will then need to do so each year and hold the information on their website for three years to show any trends. As well as hosting the information in an obvious place on the company’s UK website, employers will also need to upload their gender pay metrics on a Government website. More on the legal requirements from our HR colleagues here.

What do we think about it?

The transparency this data will drive is important, but at the same time this is just a snapshot it will provide may often hide a more complex picture. We’ve also got some way to go to educate people to understand that a gender pay gap does not automatically mean there is an equal pay problem!

After they’ve crunched the numbers manufacturers are likely to unearth some higher than average figures. However, this is not due to a lack of support for women in our sector, far from it.  Instead, the problem is at the grassroots. Just a handful of engineering apprentices and graduates are female and far too few young girls are studying STEM subjects. Until we move the dial on female recruitment in our industry we are unlikely to see much movement on closing the gender pay gap.

 

Tier 2 non-EEA migration changes

global-people

What is it?

The next wave of non-EEA migration changes. Summarised (in as employer friendly terms as I can) as follows:

  1. Immigration Skills Charge – employers who recruit (sponsor) non-EEA workers will need to pay £1,000 very year per employee. This was initially supposed to fund apprenticeships but as you may have noticed we now have the Levy. Government’s gone quiet on what it will spend the funds on…
  2. Minimum salary threshold increase – minimum salaries have gone up to £30,000 (up from £25,000) or the appropriate salary for that job role. Few exemptions but nothing to write home about
  3. No more short-term Intra-Company Transfer route – the minimum salary for non-EEA workers coming to the UK from an overseas branch to work in the same group of companies in the UK will increase to £41,500. That’s right restrictions on transferring employees across global companies! This is because the short-term route which had a longer threshold has now been abolished meaning only the long-term route is now available.

What do we think about it?

One word – absurd. Only one in ten manufacturers specifically plan to recruit a non-EU worker in the next 3 years but 46% will if they are the best person for the job. Attempting to deter employers from recruiting overseas but hiking up costs is one thing but to try and restrict global companies from moving employees from one site or plant outside of Europe to the UK will be seen as utter madness. It won’t fix the skills crisis and it won’t make the UK seen as a place to do business.

A lower cost of doing business?

At EEF we have long called for an industrial strategy that lowers the cost of doing business but with a flood of regulatory changes in force today it seems we are still some way off. Yes, we can pick out some benefits on two of the three above, but not without their challenges.

Please Government give businesses a bit of a break….and let’s hope today is not industry’s breaking point.

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