The introduction of this tax relief suggests that ministers have recognised the significant impact that HR issues can have on businesses.
The Government wants businesses to grow. Yet the costs associated with sickness absence are significant and have a tangible bottom-line impact for many firms, particularly start-ups and SMEs.
Attempting to tackle long-term injury or illness costs is a concrete example of how good HR managers can deliver real bottom line benefits for their business.
Many firms underestimate the likelihood of being affected: research shows employers need to be prepared for as many as one in 10 of their employees to be absent for 6 months or more due to illness during their working lives.
In fact, staff are three times more likely to go off through illness or injury than to die in service. Yet businesses tend to over insure on life cover in their benefits packages, while just one in ten employees has income protection.
To address the issue, the Government commissioned the Frost/Black Review, an independent investigation into how the costs associated with sick leave could be reduced. But while the Government accepted the majority of the recommendations, its commitment to helping HR professionals was not immediately clear.
In the Budget, the chancellor George Osborne announced that tax relief for rehabilitation would be provided - this will be consulted on towards the end of the year. The Government will introduce a targeted tax relief so that up to £500 paid by employers on health-related interventions recommended by the Health and Work Assessment & Advisory Service (HWAAS) is not treated as a taxable benefit in kind. It is refreshing to see such a clear statement of intent from the Government on this important matter.
However, while the measures are a big step in the right direction, further clarity is needed around the policy's implementation to ensure this opportunity to help businesses has maximum impact.
While very welcome, £500 is not a large amount of money given that an average individual company with 500 employees loses £620,000 per year in sickness absence costs. This makes it vital that any Government tax relief works as hard as it can for individual employers. Yet the wording of the Budget statement suggests only standalone treatments will qualify for tax relief, once they have been recommended by the HWAAS.
Forward-thinking employers already invest up-front in health and wellbeing services such as income protection, which typically cover the rehabilitation costs if an employee were to suffer a long-term illness. Allowing such up-front provision by employers to qualify for tax relief would ensure the policy has maximum impact.
In addition, structuring relief that way would carry an implicit recognition that rehabilitation is not the only sickness absence cost that affects employers. By complementing protection products such as IP, which also covers up to 80% of an employee's salary, the Government funding would then encourage businesses to adopt a long-term and integrated vision around managing absence. Facilitating this comprehensive approach would deliver the greatest benefit for businesses and the economy alike, rather than treating health interventions and rehabilitation in isolation. We hope the impending consultation process with the Government will provide the opportunity to address this.
Although these details need to be properly thought through in consultation with the industry, the Government's announcement to provide tax relief for rehabilitation is encouraging. It shows that it is continuing to listen to and understand the needs of businesses. With this in mind, we hope that further changes will be put into place to allow UK businesses to grow, even when presented with difficult circumstances.
John Letizia (pictured) head of public affairs and CSR, UNUM