Tax cuts could encourage over 50s back to work, says RSM

The UK’s current tax burden is likely to discourage economically inactive older people to return to work, says RSM UK. 

While the Chancellor Jeremy Hunt has made it clear that getting economically inactive workers back into the workforce is a key priority, RSM says tax cuts could help incentivise over 50s to answer the government’s call.  

Chris Etherington, private client tax partner at RSM UK, said: “With a general election looming, and the Labour party vowing to reverse the pension changes announced in the last Spring Budget, government and businesses both have a key part to play in encouraging older workers back into the workplace. 

“A more dramatic and straightforward tax cut, for example to National Insurance contributions (NICs) could help to achieve this, or the bolder move would be to scrap NICs completely and revamp the income tax system.”

According to recent figures published by The Resolution Foundation, the shortage of workers in the UK’s labour market, partly due to older workers retiring early, could put a greater tax burden on the younger generation. 

Yet research from RSM UK’s latest ‘The Real Economy Report’ shows that well over three quarters (82%) of businesses have no initiatives in place to encourage older or retired workers back into the workplace. RSM’s research also reveals that nearly a third of businesses (30%) do not currently offer flexible working patterns.  

According to the report, over half (52%) of businesses who currently offer hybrid working options have asked their employees to return to the office for a minimum number of days/hours per week in the last 12 months and around a third (32%) plan to do so in the next 12 months. In addition, nearly half (42%) have asked their employees to return to the workplace full time in the last 12 months, and 30% plan to in the coming 12 months.

While the emphasis on getting workers back into the workplace is being driven by the desire to improve productivity levels (33%) and promote collaboration (15%), this could be a major disincentive to those who require flexibility. 

Deborah Payne, associate director at RSM UK, said: “Our research suggests that businesses struggling with recruitment and retention issues may not be making the most of the potential labour market. 

“Given the various economic challenges and pressures that businesses are currently facing, attracting older workers back into the workplace may not have been at the top of their agenda, but it’s important not to overlook what they’re able to bring to the team. Having a mix of generations and encouraging cross-collaboration, where everyone contributes will benefit the whole team.”