Budget raises employment costs but fails to provide clear plan to boost productivity and jobs growth across the economy

Responding to the Budget, Peter Cheese, chief executive of the CIPD, the professional body for HR and people development, said:

“The Chancellor has further raised employment costs for business but not done enough to articulate how to encourage growth and investment and boost productivity across the economy. Measures to boost growth and support businesses have never been more important, in light of strong headwinds to recruitment and investment in workforces.

“Employment costs have increased across the board in the past year but there is still no coherent plan from the Government on how it will work with employers to improve productivity across the economy, to help businesses invest in skills and support technology adoption.

“The Chancellor’s support for the UK industrial strategy’s key high growth and green energy sectors is welcome. But there was little to suggest the Government has a plan to support employers in improving skills development, opportunities and productivity for the 75% of the workforce that isn’t in these chosen industries. Unless this is addressed, it’s hard to see how there will be sustained improvement to economic growth or living standards.

“The Government will also need to continue to consult, and even compromise on some elements of the Employment Rights Bill, to ensure they don’t put employers off hiring, particularly young people and other groups perceived as presenting higher recruitment risks. The CIPD will continue to engage closely, consulting with our members, and to help develop the guidance and support businesses will need to prepare for the many regulatory changes coming over the next couple of years.

On youth employment: 

“The 8.5% rise in the National Minimum Wage for young workers, though well-intended, risks further reducing job opportunities for this group, who are already hard hit by last year’s Budget changes.

“The announcement of additional support for SMEs to take on an apprenticeship through subsidising the cost of training is welcome and should encourage more small firms to take on an apprentice. The further support set out for the Government’s Youth Guarantee is also a positive step. However, these measures are still not enough to address the collapse in apprenticeship provision for young people in recent years or tackle high and rising levels of young people not in employment, education or training. With long-term unemployment for young people at a 10-year high, we need bolder action on skills to prevent a lost generation.

“We need an Apprenticeship Guarantee for 16-24 -year-olds, backed by targeted hiring incentives for SMEs to reduce recruitment costs and unlock apprenticeship starts in small firms which have significantly fallen in recent years.”  

On salary sacrifice changes:

“Capping salary sacrifice into workplace pensions will be seen as another unwelcome tax on businesses and workers. For many employers this will likely increase their employment costs while reducing workers’ pension contributions and their ability to save for retirement. We urge the Government to rethink this ahead of 2029 in the hope that growth measures will be successful and mean that this disruptive change is not needed.”