Budget 2018 – Working through the implications for HR


There are a number of areas where Budget 2018 will effect HR practice and budgeting.

While it is positive to see the country move to balance its overall finances, the nature of the changes are a lot of small widely-spread improvements for individuals and a range of corporate tax changes which will have a positive or negative impact, depending on your sector. 

The biggest payroll impact will be the increase in the National Minimum Wage form 1 Jan 2018, and it will be interesting to see if schemes such as the share option scheme and zero Benefit in Kind for electric vehicles will incentivise employers. Overall there is nothing that will have a significant effect on the current challenge of attracting and retaining key talent. Below is an update on the main HR implications of Budget 18, and the CPD programmes we are running to help build your HR analytics joinery and increase influencing and effectiveness of HR BP and similar roles.

Employee Engagement share scheme for SMEs

  • There will be a new Key Employee Engagement Programme (KEEP) to support small and medium enterprises to attract and retain key employees. It will provide key employees with a financial incentive linked to the success of the company by giving advantageous tax treatment on share options. It will apply to employees of unquoted Small and Medium Enterprises with effect from 1 January 2018, subject to EU approval. Under this scheme, any gain realised on exercising a qualifying share option will be exempt from income tax, USC and PRSI provided certain conditions are met, estimated to reduce tax payable by between 15 and 19%.

Benefit in Kind and Electric vehicles

  • The Budget announced the removal of Benefit in Kind (BIK) tax for employees and directors when they are provided with an electric car or van by their employer.  This will make it significantly more attractive to offer an electric company car or van as a benefit as there will be no taxable benefit, and may lead to a rise in interest in company cars. The tax benefit will be introduced from 1 January 2018 to 31 December 2018 while a more comprehensive review of BIK on motor vehicles takes place. This BIK benefit is in addition to the VRT relief and SEAI grant of up to €5,000 each already in place on electric vehicles. The BIK exemption is limited to cars or vans which derive their motive power solely from electricity (no exemption is available in respect of hybrid cars or vans). Electric charging points on site will also not give rise to a taxable benefit from 1 January 2018.

Wages and National Minimum Wage

  • Following the recommendation of by the Low Pay Commission, the National Minimum Wage will increase from €9.25 per hour to €9.55 per hour with effect from 1 January 2018.
  • Overall there will be small benefits to employees’ take home pay as a result of the reduction to USC rates and the raising of the entry point to the higher rate of tax. It is positive that the Government will take time to carry out a consultation on the future of USC and PRSI.

Implications of social welfare increases

  • The €5 a week increase in weekly social welfare payments includes social welfare payments to employees when they are out of work, such as maternity, adoptive and illness benefits, as well as those who are job seekers, pensioners, carers etc. In effect, this means a little more money in employees’ pockets if there is no employer top-up benefit. Where there is a top-up benefit, this will lead to a small saving for employers while employees are on sick leave, or State paid maternity and adoptive leave.  Depending on pension scheme rules, this may effect pension pay-outs under some Defined Benefit pension schemes.

Employment supports

  • A new Youth Employment Support Scheme to help young long-term jobseekers back to work will be introduced in 2018 and the JobsPlus scheme will be enhanced so that employers will receive a subsidy of €10,000 to employ any long-term unemployed person aged over 50. The Back to Work Family Dividend and Working Family Payment will continue with only minor improvements.

Progressing equality and gender proofing of Budget measures?

  • The Minister for Finance’s speech referenced work relating to the equality and gender proofing of Budget measures. A policy document on Equality Budgeting was produced as part of the Budget process. However no actual commitment has been made to carry this out and we have yet to see the political will to address issues where the impact is less favourable on certain groups.  For example, the report on working hours in the public service, also released as part of the Budget process, had no evaluation or comparison of the impact of work hour changes based on gender.

Other measures

  • A new €300m Brexit Loan Scheme will provide affordable financing to Irish businesses that are either currently impacted by Brexit or will be in the future. This is targeted at businesses with up to 499 employees and has a proposed interest rate of circa 4%.
  • The increased attention on housing needs to urgently convert into action to start to tackle housing crisis, and the issue of accommodation is already perceived as a major risk in terms of employment growth.
  • Increased capital investment for Enterprise Ireland, the IDA and R&D is aimed to support employment growth. Specifically there will be increased funding for Science Foundation Ireland to continue support for top research personnel involved in industry and international collaboration.
  • We should expect an increase in public services due to the increased employment and jobs in health/ Gardaí / teaching and special needs, and it is important that these new jobs are focussed on front line services.

Next steps

  • Assess your polices and budgets to understand the implications and opportunities this presents for you and your organisation
  • Ensure you and your HR colleagues have the skills and information to influence credibly across the organisation. Below are upcoming CIPD opportunities to help in this regard.
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