NI increase opens door to pay claims

The 1 per cent increase in National Insurance announced in last week’s
Budget could lead to pressure for higher pay settlements, claims the CIPD’s
chief economist.

John Philpott said the increase, estimated to cost employers an extra £4bn,
could mean that staff push for additional wage rises to compensate.

The rise in National Insurance will apply to earnings above £4,615 from
April 2003.

Philpott said if businesses succumb to the push for higher wages, they will
need to economise on staff or absorb costs through higher productivity.

"It’s an incentive to increase productivity. Day-to-day that can be
difficult, but [HR will] need to rise to the challenge," he said.

Chancellor Gordon Brown also announced plans to invest £40m in a pilot
scheme that subsidises employers who give staff time off to improve their

The scheme, part of a package of new training measures, will enable
employees to improve basic skills during work time.

The programme will operate in six Learning and Skills Council areas and is
to target employees who lack basic skills, roughly to the equivalent of GCSE

These LSCs will identify volunteer organisations from the private and public
sector that are willing to release low-skilled employees during work time.

The pilot will offer employers between 75 and 125 per cent of the wage costs
of participating staff through grants.

It is anticipated the grants will be replaced by a new tax credit system if
the scheme goes nationwide after the pilot ends in August 2003.

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