How will Liz Truss impact the World of Work?

The new prime minister has inherited a post-pandemic Britain in the middle of a cost-of-living crisis, spiraling inflation, and a job market in unprecedented upheaval. It cannot be ignored that Liz Truss has come to power in the middle of a difficult economic situation. The full impact of her administration on both businesses and employees will partly depend on how she plans to support businesses, and their employees and the impact of these policies on the economy. What are some of the likely changes

National Insurance

Liz Truss has pledged to reverse the National Insurance increase of 1.25% for working-age employees, their employers, and the self-employed that took effect in April 2022. The increase was implemented due to the introduction of the Health and Social Care (HSC) Levy which was designed to help fund the NHS backlog following the Covid-19 pandemic and the current crisis in social care. The current plan is for the HSC levy to be formally separated from National Insurance contributions from April 2023 and extended to workers who are above state pension age. However, under Ms Truss’ proposal, the HSC levy would be scrapped entirely.

Following the latest rise, employees now pay 13.25% NI on weekly earnings between £190 and £967, and 3.25% on anything above, while the rate for employers increased to 15.05%.

Off-Payroll working rules (IR35)

Ms Truss has also said that there would be a government review of IR35 regulations. Proposed IR35 reforms for the private sector took effect from April 2021 and represented the biggest change to employment tax in decades. However, this would not be the first time that IR35 has been reviewed, so it remains to be seen whether any review conducted under her leadership would result in any meaningful changes to the current legislation.

Corporation Tax

A further measure proposed by the new PM is to abandon April’s scheduled corporation tax rise.  From 19% to 23%, in a bid to help the economy recover.

Energy Costs

The government has set out a plan to support people and businesses with their energy bills and tackle the issues in the UK energy market through increased supply.

Replacing the price cap with a new Energy Price Guarantee. The Energy Price Guarantee will ensure that a typical household in Great Britain pays an average of £2,500 a year on their energy bill, for the next 2 years, from 1 October 2022.

The Chancellor's "mini-Budget" is due in the next week after the period of National mourning. The energy cap for business should be outlined at that stage.

Revisions to Industrial Action

Truss also promised to set legal minimum staffing levels during strikes for every industry in her first month, aiming to reduce disruption caused by workers protesting. She is also considering abolishing public sector workers’ right to use paid leave for trade union activities, which includes organising strikes.

Cutting diversity and inclusion jobs

During her campaign, Truss said she would “tackle left-wing groupthink in government”, including scrapping diversity jobs that she claims, “distract from delivering on the British people’s priorities”.

According to her campaign, there are at least 326 diversity and inclusion roles in government departments right now, the removal of which would reportedly save around £12 million a year. “As prime minister, I will run a leaner, more efficient, more focused Whitehall that prioritises the things that matter to people and is laser-focused on frontline services,” she said. “There is too much bureaucracy and stale groupthink in Whitehall.”

The unprecedented pledge came as part of a bid to save money and has been widely questioned by HR professionals and businesses.

Sandra Kerr CBE, race director at Business in the Community said, “now, more than ever, we need champions and executive sponsors for race at the top table, mentors and sponsors for employees who are black, Asian, mixed race and from ethnic minority backgrounds… a new prime minister has not eradicated the existence of racial inequality at work just by removing a few standalone roles.”

Secondary pledges

Truss has also pledged to reform the Working Time Regulations, which currently limit the working week to 48 hours but make it easy for employers to opt-out of this. 

She has also planned a raft of education reforms to build employability skills among the young, including expanding successful academies, introducing more free schools, and reforming university admissions so that students win places based on actual rather than predicted grades.

Overcoming Labour Shortages

One of the biggest challenges is creating a sustainable labour market. We have all experienced HGV driver shortages resulting in long queues at petrol station forecourts, a lack of fruit pickers, and air travel disruption.

In the high-tech sector, we’ve been experiencing a globally tight market for specialist skills for many years. In 2021 Microsoft predicted the “Great Resignation” with their Work Trend Index predict 41% of workforce attrition. According to the US Labour Department, a record 4 million people quit their jobs in April 2021. Many employees started claiming more flexibility, defining hybrid work as the best alternative in the post-pandemic workplace.

Recently, The World Economic Forum predicted that “The Great Resignation” was far from over with a fifth of workers planning to quit in 2022. That was the key finding of consultancy firm PwC’s Global Workforce Hopes and Fears Survey of more than 52,000 workers in 44 countries and territories, carried out in March 2022. It said pay is unsurprisingly the main factor in people wanting to change jobs, with 71% citing it as a key reason.

The critical thing is that while the COVID pandemic has highlighted the ever-growing labour shortages in the UK, and around the world – the underlying issue has been with us for years. A smaller labour force in the UK as “baby boomers” retire, the inefficiencies in our skills system, and the deployment of technology and productivity, were always going to make for a challenging decade. 

Much of this challenge lies with business to address. The REC report Overcoming Shortages focused on identifying potential solutions, as well as looking to Canada and Germany for things we could learn. 

For years businesses have talked about employees as their most important asset and the thing that drives their success. That means raising workforce planning up the agenda at C-suite and Director level, ensuring the skills pipeline is feeding businesses the people they need, and hiring with a long-term view, rather than dealing with recruitment as a procurement function. In 2022, Redline Group has been advising firms on permanent and contract recruitment, and the challenges with a focus on building world-class teams.

For further information on our knowledge-led approach to recruitment and retention of world-class teams within the high-tech and electronics sector please contact us at info@redlinegroup.com or call us on +44 (0)1582 450054.