United Kingdom

2020 Budget: Aon’s view on the seven key implications for employee benefits

  • COVID-19 and Statutory Sick Pay – accurate absence recording necessary
  • NHS funding – employers could be tasked to improve health and wellbeing of employees even further
  • Sustainability and pensions also top the list


LONDON (19 March 2020) – There are seven key implications for employee benefits that employers need to consider as a result of the 2020 Budget says Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions (NYSE: AON).

Jeff Fox, principal at Aon, said:
“This year’s Budget will have a significant impact on employers. It’s estimated that one in five employees may be off work at any one time due to COVID-19. This will be an enormous challenge for businesses to face, as well as needing to get to grips with the Government’s new stance on Statutory Sick Pay. Yet on top of this, there are complexities with new pension rules and changes to NHS funding, general and financial wellbeing, and sustainability. Each of these impact employers’ benefit programmes. One thing is for certain, everything is moving incredibly quickly.”

Aon’s experts have reviewed the detailed 2020 Budget policy paper to show top-level implications to employee benefits programmes:

  1. 1. COVID-19 and Statutory Sick Pay (SSP)
    The Chancellor outlined a range of measures to soften the impact of COVID-19 on businesses and individuals. Of particular note are the temporary changes to eligibility for SSP. The forthcoming COVID-19 Bill will temporarily allow SSP to be paid from the first day of sickness absence, rather than the fourth day, for people who have COVID-19 or have been advised to self‑isolate (or caring for others who self-isolate), even if they have not presented with symptoms. Firms with fewer than 250 staff will be refunded for sick pay payments for up to two weeks.
  2. Aon view: The COVID-19 outbreak has brought into sharp focus the need for employers to maintain accurate records of staff absences, and to ensure that any staff calling in unwell receive the most up-to-date guidance and information on what action to take. Aon’s 2020 Benefits and Trends Survey indicated that the vast majority of employers (92%) still manually record absences either via a HR system or spreadsheet, with only 6% utilising the services of a specialist provider.
  3. 2. NHS funding
    An additional funding of £6bn has been announced over the course of this parliament for the NHS in England to pay for recruiting nurses, GPs and other primary care practitioners. The government is also committing an extra £12 million for the National Institute for Health Research in 2020-21 to target research into preventable diseases, aiming to deepen its understanding of how to reduce the burden of illness in the future.
  4. Aon view: While it’s positive that there is investment in increasing the capacity of the stretched resources at the NHS, the comparatively insignificant investment in tackling the underlying causes of poor health is disappointing. The economic benefits of a more preventative approach are evident, but it is anticipated that employers will increasingly be tasked to improve the health and wellbeing of the nation.
  5. 3. Financial Wellbeing
    From early 2021, the Government will provide a period of up to 60 days, where people in problem debt will be protected from enforcement action by their creditors and the charging of further interest and fees on their debts. The Government also wants to support alternatives to high-cost credit such as payday loans by improving access to social and community lenders.
  6. Aon view: This is a positive development to support the financial wellbeing of some of the most financially vulnerable. Forty-eight percent of companies are planning to support employee financial wellbeing too by implementing initiatives in the next 12 months*.
  7. 4. Mental Wellbeing
    There is an extension of the range of tax-exempt services that can be provided by Employee Assistance Programmes.
  8. Aon view: This is good news for employers, 92% of whom offer an EAP to employees, and at a time when mental health has risen up the corporate agenda*. The specifics of what additional medical treatment services, such as Cognitive Behavioural Therapy (CBT), and the industry’s response, will become clearer over the coming weeks.
  9. 5. Ageing Population
    The long-term challenges presented by an ageing population which will place an ever-increasing burden of care on the state has already been called out by some commentators as being largely overlooked in this Budget. Many employers already acknowledge the impact of the ageing population, the increased burden of care on adults of working age and the prospect of people having to work for longer - in all likelihood in a state of deteriorating health.
  10. Aon view: Without a significant change of policy it is unlikely that the State will be able to keep up with this increased demand for care. Employers will increasingly be forced into making tough decisions about how much strain they are willing or able to take on themselves.
  11. 6. Corporate Social Responsibility and Sustainability
    Highlighting that the UK has already cut carbon emissions more than any other G7 country, the 2020 Budget looked to further improve these credentials by encouraging the transition to electric cars through investing in charging infrastructure, extending the plug-in car grant (PICG) on electric vehicles till 2022/23 and through restricting the use of red diesel.
  12. Aon view: These measures should see a boost in the take up of ‘Green Car’ salary sacrifice schemes. For employers there are many environmental and sustainability opportunities to consider – from removing single use plastic to offering electric cars and cycle to work schemes in benefits packages. The range scales from employers needing to consider charging points in car parks, showers and storage racks for cyclists to ethical pension funds. Fifty-four percent of employers say employees expect clear environmental and sustainability policies*.
  13. 7. Pensions

    Tapered Annual Allowance
    The pre-Budget speculation that the issues for NHS staff arising from the Tapered Annual Allowance would lead to modifications came to fruition as the Chancellor announced some changes to these regulations. With effect from 6 April 2020 the ‘threshold’ and ‘adjusted’ income levels will both be increased by £90,000 to £200,000 and £240,000 respectively, which will significantly reduce the number of people impacted by this legislation.
  14. Aon view: While this is a welcome change resulting in a greater number of individuals now able to increase their pension funding without incurring tax charges, for those who are still subject to this legislation, the issues regarding the complexity of the rules and the inability to plan pension contributions where earnings can vary due to bonuses or additional payments are likely to remain a matter of frustration and concern.
  15. Pension Tax Relief Administration
    The Budget papers also highlighted that the Government intend to publish a “call for evidence” relating to the anomaly of tax relief for lower earners when pension contributions are made via net pay arrangements rather than using the relief at source method.

Jeff Fox summarised:
“This was an extraordinary Budget in many ways, as the Government looked to wrestle back control of the current COVID-19 crisis. Even at the time of writing, we have seen further measures taken that build upon many of the original Budget announcements. This is a fast-moving time, unprecedented in the impact both employers and employees are experiencing.”

*Aon’s Benefits & Trends Survey 2020


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