UK Urges Tax Breaks To Boost Labor Productivity

by Robert Lee, Tax-News.com, London

14 June 2016

EEF, the manufacturer's organization, has called for the introduction of tax breaks to tackle the UK's "chronic sickness absence problem."

EEF surveyed 288 of its members on their absence trends over the past year. It found that average days lost per employee in 2015 were 5.3, with manual employees having a higher average level of absence compared to their non-manual co-workers. It also observed that the prevalence of absence appeared to increase with company size.

According to the survey, 41 percent of companies said that long-term absence has increased in the last two years. Of the workforce covered in the survey, five percent were off for a period of four or more weeks.

EEF said that two-fifths of companies rely exclusively on the NHS as the primary source of treatment to reduce absence, while only 18 percent pay for non-NHS treatment. Nearly a third of those questioned said they would pay for medical treatment if there was a benefit to the company, and 59 percent said they would be most incentivized to pay for the cost of treatment by some form of employer allowable business expense.

EEF argued there need to be more fiscal incentives to encourage employers to provide private healthcare to employees. It recommended that the Government review the current levels of employer taxation for employer-led health interventions where they are currently taxed as benefits in kind. It said the Government should analyze different fiscal incentives, such as changes to allowable business expenses, tax credits, and tax relief, and treat tax relief for Private Medical Insurance in the same way as the GBP500 (USD707) tax exemption for treatments recommended by the Fit for Work service.

In addition, EEF urged the Government to consider tax relief on income protection insurance or group income protection, as a means of providing sick pay and rehabilitation support to employees. Finally, it suggested that companies be given fiscal incentives to fund treatments as part of rehabilitation that would otherwise have had to be provided by the NHS.

Terry Woolmer, Head of Health & Safety policy at EEF, said: "Keeping people fit and healthy, whilst enabling a speedy return to work from absence is essential to economic growth and improvements in productivity. However, currently we have long term absence on the increase and an under pressure NHS which is struggling to deal with the issue. Given this situation is only going to get worse with an ageing population radical action is now required.

"Government must now use fiscal incentives to encourage employers to pay for private medical treatment and allow it to be offset in the same way as other business expenses. Not only would this help take the pressure off the NHS but it would allow a speedier return to work. This would be a win-win for Government, the employee and employers."

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