What will a Labour Government mean for businesses, employees and the benefits they offer?


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What will a Labour Government mean for businesses, employees and the benefits they offer?

With a new Labour government at the helm, changes in healthcare, pensions, and employment rights are on the horizon. Here is a look at what this could mean for businesses, employees and the benefits offered. 

The government has committed to boosting NHS services, focusing on dental care, GP availability, and mental health support, including the addition of 8,500 mental health staff. Labour's strategy emphasises shifting resources from hospitals to primary care and community services, enhancing GP training, and ensuring greater numbers of face-to-face appointments. 

They also plan to reintroduce the concept of the family doctor and empower pharmacists and opticians in healthcare delivery. Furthermore, Labour aims to tackle NHS waiting lists by adding two million appointments annually and using spare capacity in the independent sector.

However, these changes will take time to implement and in the short-term, the reality is that not much is expected to change. Waiting lists are set to remain high for some time to come and delays in accessing GP appointments and treatment will continue, causing ongoing challenges and worry for individuals and businesses alike. 

Impact on individuals 
Insights from Howden Life and Health reveal that in the last twelve months, there has been a 46% increase in individualsi - without access to employer-funded healthcare - choosing to invest in private medical insurance to help accelerate their access to diagnosis and medical treatment. 

Mike Dalby, Managing Director of Howden Life and Health said: “The ongoing challenges in the NHS will take time to fix and as a result, we expect the numbers of individuals choosing private healthcare to continue to rise, as they seek peace of mind that they will be able to get access to treatment at the point of need”. 

“The healthcare market has responded by adapting insurance solutions to include value added services such as mental health support and virtual GPs as part of the overall policy. Opting for private medical insurance can be daunting, as there is wide choice available, so we recommend individuals seek professional advice from a specialist broker who can shop around to find the right level of cover to meet their personal needs and budget”.

Impact on employers 
For businesses, the ongoing challenges within the NHS will mean the continued reliance and increased employee demand for Private Medical Insurance (PMI) to bridge gaps in healthcare and to help to reduce long-term absence in the workplace. PMI is designed to complement the NHS rather than replace it and growing numbers of employers are now looking to add this to their overall benefits package as a valued employee benefit.

While PMI will be attractive to businesses and their people, it may not be financially viable for some employers. We are seeing rising costs and increased usage driving up private healthcare premiums by typically 20% ii. In these cases, there are alternative options that can still provide excellent benefits. Health cash plans, virtual GPs, and wellbeing solutions can offer attractive and more cost-effective alternatives, ensuring employees receive support without the same level of financial investment.

Cheryl Brennan, Managing Director of Howden Employee Benefits & Wellbeing said: “Labour’s commitment to address the problems the NHS faces is welcome news, but we know that this will take time to realise. The reality is that many employers simply cannot wait, and more are seeking to put in place benefits that will proactively help their employees to look after their health and access treatment quickly.”

“There are many factors to consider when selecting the most appropriate cover for your individual business and people, all of which can affect the overall price that you pay and the ultimate long-term sustainability of the benefit. Speaking to a healthcare expert is essential to ensure that you implement healthcare cover that meets your organisation’s specific needs and which your employees will truly value”.

The new government has committed to maintaining the triple lock on state pensions, ensuring they rise with inflation, average earnings, or by a minimum of 2.5%. While this will be a welcome relief for retirees, this policy has minimal immediate impact on business operations.

Recent adjustments include a U-turn on Lifetime Allowance (LTA), benefiting higher earners, and Royal Assent for lowering the auto-enrolment earnings threshold and including 18-year-olds. However, clarity on implementation timelines is needed. 

Labour pledges a comprehensive review of pensions to enhance outcomes and stimulate UK market investments. 

The UK has an ageing population coupled with the fact that the current national workforce isn’t saving enough for retirement. While Labour did not detail increases in auto-enrolment contributions within their manifesto, many in the pensions market believe that increases to employer and employee contribution levels are inevitable.

Impact on employers 
Cheryl Brennan commented: “Alongside private healthcare, we know that pensions are a highly valued employee benefit. Some of our clients, who want to stand out as employers of choice, and are committed to employee a meaningful financial wellbeing strategy are already offering pension contributions above the minimum levels required as part of their overall talent recruitment, retention and wellbeing strategy.”

“However, the reality is that many people have inadequate pensions savings for their retirement and as a result, we believe further government interventions are around the corner. With increased minimum contribution rates likely, we encourage businesses to strategically prepare. For those employers not currently using it, consider salary sacrifice as a useful tool in helping to enhance their workplace pensions.”

Changes to Employment Rights
Labour's green paper proposes significant changes to employer rights that will impact businesses and change employment rights from day one, including sick pay and maternity benefits. These changes will enhance employee security but may increase costs for businesses, particularly with the broadening definition of an employee and greater support for union rights.

The ban on zero-hours contracts and the establishment of clear workers' rights policies will increase also staffing costs. Although the increase in the National Living Wage impacts a broader economic audience, businesses will need to adjust their operations to comply with these new regulations.

Enhanced voluntary rights are expected to take effect in 2025 and 2026, potentially increasing operational costs for larger employers. For instance, covering the first three days of sick pay, which is currently unpaid, could become mandatory.

Cheryl Brennan commented: “Labour have set out a number of reforms designed to give employees greater financial protection and security. Again, these changes will take time to implement but we encourage businesses to prepare for the changes and consider within the context of their overall benefits strategy and planning. This should include factoring in any potential impact on costs.”

The new government's plans include significant changes in healthcare, pensions, and employment rights, however, they will take time to implement. Employers should stay informed, budget for potential cost increases, and work with professional advisors to adapt to the evolving regulatory environment. By maintaining a proactive approach, businesses can navigate these changes smoothly and continue to support their employees effectively.

Employers should also consider reviewing and potentially increasing contributions to Defined Contribution (DC) pensions now, taking advantage of the current opportunity to prepare employees adequately for retirement amidst upcoming reforms. Engaging with brokers and consultants to navigate PMI and pension adjustments will be crucial in managing these transitions effectively.

i Howden Life & Health policy data
ii UK health insurance rates to soar on surging claims-industry experts | Reuters

Howden Employee Benefits & Wellbeing Limited, is part of the Howden Group. Registered in England and Wales under company number 2248238, with its registered office at One Creechurch Place, London,UK,EC3A 5AF. Authorised and regulated by the Financial Conduct Authority.