The Government has published this year’s Budget, identifying it as “a Budget for growth”. A key theme is encouraging people to return to the workforce given the significant number ‘absent’ due to long-term sickness, caring responsibilities, and early retirement. The package of new measure’s also aims to facilitate people to work until much later in life.     

In this article we summarise the headline proposals that will impact employers.

Support for ill-health

With the Chancellor highlighting that more than 2.5 million workers are currently economically inactive due to disability or long-term ill health, the government has announced key measures aimed at enabling disabled people to return to work and supporting people through periods of ill health. These include:

  • A Health and Disability White Paper containing plans to reform the welfare system to better meet the needs of disabled people. The overall aim is to support disabled people to try to work without fear of losing their existing financial support.
  • WorkWell Partnerships will be piloted in England to deliver integrated work and health support in local areas.
  • A new voluntary employment scheme for disabled people, known as the Universal Support programme, will match disabled and sick people who want to work with existing job vacancies. Up to £4,000 will be spent per person to help find suitable roles, with 50,000 places eventually available. 
  • New funding will be provided to expand an existing programme providing tailored Work Coach support to disabled people so that they can find suitable work. 

Occupational health services

The government has confirmed that funding will be expanded in relation to the upcoming subsidy pilot for occupational health services. The subsidy scheme is understood to apply to small and medium-sized employers, although the eligibility criteria are not yet clear.  

Further, two new consultations on how best to increase occupational health across UK employers will be published, exploring both regulatory options and tax incentives.

Occupational health support can play an important part in effectively managing employees’ ill-health absence. We highlighted the benefits of a strategic action plan when it comes to managing employee ill health in our previous articles available here.  

Pensions reform and support for older workers

Key changes to the current pensions’ regime to support older workers to remain in the workforce include:

  • The lifetime allowance for tax-free pension savings will be removed from April 2023 and subsequently abolished from April 2024.  This change effectively removes the punitive tax rate which applies to savers who exceed the current lifetime threshold. This has been a particular issue within the NHS with some doctors, consultants and other high-earning professionals choosing not to work or to reduce their hours rather than incur the pension-related tax charges. 
  • The annual allowance (the total amount which can be saved into a pension each year before tax is incurred) will increase from £40,000 to £60,000 from April 2023.
  • The money purchase annual allowance will also increase from £4,000 to £10,000, allowing those who already access their pension benefits to continue saving an increased amount into their pension should they choose to return to work.  

An enhanced digital midlife MOT will be made available to those over 50, providing financial planning, health and career guidance ahead of retirement. Further, the over-50s will have access to “Returnships”, a refined group of skills programmes with focus on flexibility and previous experience to facilitate a path back into work. 

Childcare support for working parents

In a move that is designed to remove barriers to parents working, the Chancellor has confirmed that working parents in England will be able to access 30 hours of free childcare per week, for 38 weeks of the year, from when their child is 9 months old to when they start school. 

The new entitlement will be rolled out in three stages:

  • From April 2024, all working parents of 2-year-olds can access 15 hours per week.
  • From September 2024, all working parents of children aged 9 months up to 3 years old can access 15 hours per week.
  • From September 2025, all working parents of children aged 9 months up to 3 years old can access 30 hours free childcare per week.

If childcare is needed for more than 38 weeks per year it will be possible to spread the free hours entitlement over a higher number of weeks. 

A further package of childcare measures involves additional funding to increase the hourly rate payable to current childcare providers, an adjustment to staff-to-child ratios to expand available childcare, and start-up grants for new childminders seeking to join the profession. 

In recognition that school hours do not dovetail with a normal working day, local authorities in England will also receive £289 million over two years, starting in September 2024, to expand the provision of wraparound childcare in schools.

Further, parents on universal credit who are moving into work or increasing their working hours will receive childcare funding upfront instead of having to claim it back after the event, which is the case under the current system. In recognition of the increasing cost of childcare to working parents, the maximum childcare support available through the Universal Credit will also increase to £951 for one child (up from £646) and £1,630 for two children (up from £1,108).   

Return to work support

Various measures will be introduced to increase work coach support and work search requirements for many people in receipt of Universal Credit, in a further move aimed at encouraging people back into the workforce. Broadly, these include:

  • Increasing the amount that people can earn without having to meet regularly with a work coach. 
  • Expanding the requirements on people to search for work (specifically in relation to carers for children), with work coach support. 
  • Strengthening the sanctions regime that applies where people do not look for work or take up reasonable offers of employment.


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