The Chartered Institute of Personnel and Development (CIPD) found in its annual absence management survey, which covers responses from 600 companies, that staff in the private sector were off sick for an average of 6.4 days last year, down from the 7.2 days recorded in the year before.

However, absence rates in the public sector workforce dropped barely at all, from 9.8 to 9.7 days.

This means that the average sick leave for private sector workers was one complete day below that of the national average which stood at 7.4 days, down from 8 days in the preceding year.

The CIPD estimated that total workplace absence – 185 million working days – cost the UK economy some £17.3 billion.

One reason for the decline in sick leave levels among private firms is that many employers are policing absence trends with much greater scrutiny during the economic downturn.

Some 40 per cent of private businesses said that they had concentrated more resources on reducing absence levels and the accompanying costs in direct response to the recession.

Worries among employees over job security may be another contributing factor. More than half of respondents (56 per cent) reported that they had made workers redundant in the past 12 months, with 40 per cent saying that they take attendance records into account when assessing redundancies.

Ben Willmott, senior public policy adviser at the CIPD, said: “It appears that the recession has contributed to a fall in the overall level of employee absence, with private sector absence levels at the lowest levels ever recorded by the CIPD absence management survey.”

But he added that is disappointing that public sector absence levels remain so high.

Mr Willmott continued: “There is no simple explanation for the public/private absence gap, with a number of factors in play including differences in demographic profiles with a higher proportion of women and older workers in the public sector. The public sector also has a high proportion of challenging public-facing roles such as those involved in policing, nursing, teaching and social care.

“However, there is also a fundamental difference in management culture and practice between the sectors. The public sector is more likely to provide leave for family circumstances, provide access to occupational health services, counselling services and physiotherapy. But they are less likely than their private sector counterparts to discipline or dismiss employees for absence-related reasons.”

He argued that effective absence management involves finding a balance between providing support to help employees with health problems stay in and return to work, and taking consistent and firm action against employees who try to take advantage of organisations’ occupational sick pay schemes.

The CIPD survey found that the main causes of short-term absence are minor illnesses such as colds and flu and stress, while for long-term absence the principal reasons are acute medical conditions, stress and mental health conditions and musculoskeletal conditions.

One in five employers reported an increase in the proportion of people coming to work ill in the last 12 months, and the same proportion believed that employee concerns over job security have had an impact on absence levels.

According to HMRC accounts, the tax authorities were faced with 20 million code queries in March compared with 16 million in the previous year.

The National Audit Office (NAO) has calculated that as many as 4.5 million employees may have had too much tax taken from their pay as a consequence of being allocated the wrong code, and that HMRC may have to refund as much as £1.6 billion.

Another 1.5 million workers, however, may have paid too little tax to the tune of £400 million.

HMRC put the problem down to an increasing number of coding discrepancies caused by changing work patterns.

But the tax authorities believe that 77 per cent of the 20 million cases it is dealing with will be tax neutral.

Anyone whose tax code is incorrect, the Revenue said, would be informed and their code would be altered to reflect the amount of tax they had overpaid or underpaid.

The claims arise from a European court ruling on a UK government decision in 1997 to impose a three-year time limit on the refund of overpaid VAT. Before that, claims could be backdated for six years.

A further judgement by the House of Lords meant that businesses were entitled to reclaim overpaid VAT going back to 1973.

As a result of the rulings, HMRC allowed Fleming claims, so called after the Aston Martin dealer who fought one of the series of legal cases brought on the issue, to be submitted by the end of March this year.

Up to now HMRC has repaid £1.5 billion in refunds and has set aside another £4.8 billion for repayments that may arise from the claims still being assessed.

Only 40 per cent of the 13,000 claims submitted are likely to be regarded as legitimate under the rulings, HMRC has said.

Although many claims have yet to be reviewed, it is thought that payouts will probably fall within the amounts anticipated by the tax authorities.

Chas Roy-Chowdhury of the Association of Chartered Certified Accountants said: “The lesson for any government is that they should not just make changes retrospectively to tax laws without thinking through the consequences.”

The call from the Federation of Small Businesses (FSB) came after estimates were published indicating that between 35,000 and 40,000 graduates will fail to find work this summer.

With placements falling in larger companies by 28 per cent, the FSB argued that graduates need to be informed of the opportunities available in small firms.

According to research carried out by the FSB, one in five small firms would be willing to take on a graduate.

But, the FSB pointed out, some 45 per cent of firms are unaware that they can run internship schemes.

Small businesses already play a major part in recruiting school leavers, supplying 69 per cent of apprenticeship places. Similar programmes are not, however, quite so widespread for graduates.

Internships, the FSB said, can perform a vital role in bridging the gap between graduation and formal employment. About 25 per cent of graduate internships lead to a full time job for the graduates involved.

The FSB wants the government to set aside 10 per cent of the £32 million pot of money allocated to universities to market and develop internships. The funding would be used specifically to promote some 5,000 internships in smaller firms.

In the longer term, this step would save the government around £600 for each graduate on the scheme because they would not be claiming unemployment benefits.

John Wright, the FSB’s national chairman, said that such a scheme would help businesses progress as many graduates can offer key skills, while the graduates would gain invaluable work experience rather than languishing unemployed.

Mr Wright continued: “The FSB is calling on the government to invest just £3 million of existing funds to market and develop internships in small businesses – creating an extra 5,000 placement positions for graduates in small firms.

“Small businesses are the sector to create and retain jobs and act as a bridge to formal employment. Around 20 per cent say they want to take on skilled graduates. The government must invest in linking up small businesses and graduates now to prevent graduate unemployment spiraling any further.”

The MacLeod Review of employee engagement, which was set up last September, has proposed that the relationship between employees and employers should be at the centre of business plans.

The report also urged that the government do more to support employee engagement in the workplace and that all UK firms, both large and small, should recognise the benefits of having their staff fully on board and involved.

Specifically, the review recommended that a sponsor group be set up to bring together representatives from business, the public sector, not-for-profit organisations and unions in order to boost understanding of the issue.

The government and its agencies, the review said, should work together to ensure their support is tailored to the needs of different organisations in different sectors of the economy.

A range of more practical support for businesses that want to raise levels of employee engagement should be available by March 2010.

David MacLeod, who conducted the review along with Nita Clarke, said: “This is about unleashing the potential of people at work and enabling them to be the best they can be. Whether we are in a downturn or in better economic times, engagement is a key to innovation and competitiveness.

“Employers in all parts of the economy can make a success of employee engagement through culture change, rather than investing significant financial resources.”

Business groups welcomed the report.

Richard Lambert, the CBI’s director-general, said: “It makes business sense to allow people to realise their full potential at work and to be on board for the whole journey. This report offers a refreshingly direct approach and suggests a sensible way to enable employers and employees to gain most benefit from the workplace relationship.”

The EEF backed the need to share ideas and emphasised the potential of highly skilled employees to improve the competitiveness of industry in the UK.

David Yeandle, the EEF’s head of employment policy, commented: “Although adopting employee engagement strategies is challenging for firms at this juncture, it is now more important than ever.

“In the short term all parties need to be pulling together in the same direction to get through the recession. In the longer term effective employee engagement will be vital to unlock the potential that lies within an increasingly innovative and highly skilled sector.”

The Chartered Institute of Personnel and Development (CIPD) noted that engagement levels across the economy are low and argued that the government should use its unique position to help.

Stephanie Bird, director of HR capability at the CIPD, said: “We firmly believe the calls for a national debate on the contribution of employee engagement to business performance are long overdue.

“Employers are keenly aware that in a recession it is vitally important to retain the loyalty and commitment of their workforce in order to be in a position to take advantage of the upturn. But they don’t always know how and many would welcome some help. It’s essential that these organisations get the support they need.”

Ms Bird added that the report puts employee engagement at the heart of business performance: “Employer response to the recession suggests that an ever-increasing number recognise people are indeed their greatest asset. Converting employee engagement into bottom-line results is what employee engagement is all about.”

The aim of the challenge, which has been brought by charities Age Concern and Help the Aged, is to establish whether the UK’s default retirement age is actually legal.

In an earlier hearing at the European Court of Justice, judges ruled that the entitlement of UK employers to end a worker’s employment at 65 without redundancy pay was in compliance with EU law if the decision had a “legitimate aim” linked to social or employment policy.

However, the judges also said that it was a matter for the UK’s High Court to rule whether or not the default retirement age was justified.

The charities are arguing that the law is in breach of the EU’s Equal Treatment at Work Directive.

Currently, there are some 260 separate actions pending in tribunals brought by employees who were obliged to retire at 65 even though they wanted to continue working.

It is estimated that many thousands more will file compensation claims if the High Court decides that compulsory retirement at 65 is not justifiable.

Should the ruling go in favour of the charitites then businesses and organisations may face having to argue the case for any automatic retirement age policies they run and to justify the retirement of each individual employee in order to avoid claims for compensation.

Recently, the government announced that it was bringing forward a review of the default retirement age from 2011 to next year.

Michelle Mitchell, charity director for Age Concern and Help the Aged, said: “We have heard a lot from government over the last few days about the retirement age, but ministers have dragged their heels for years on this issue, forcing us to challenge it in the UK courts on behalf of older people across the country.

“The promised review in 2010 is a step in the right direction, but it does not come soon enough for thousands of people reaching 65 now who desperately need to carry on working to pay the bills, boost their pensions or simply because they want to.”

Under existing law, employees have the right to request that they be allowed to carry on working, and employers must consider such requests.

Employers’ group, the CBI, has consistently defended the default retirement age, saying it enables firms to plan for the future.

Katja Hall, the CBI’s director of HR policy, commented: “Anyone can ask to work beyond the age of 65, and our research shows 81 per cent of these requests are accepted. Companies don’t want to lose good people, whatever their age.”

But Ms Hall added: “In certain jobs, often physically demanding ones, working beyond the age of 65 just isn’t possible for some people. Companies with small numbers of staff have particular problems adapting jobs to the needs of older workers. Without a workable alternative, it would be wrong to scrap the current arrangements.”

The warning came from the Chancellor, Alistair Darling during a meeting this week with bank leaders.

Mr Darling expressed concerns that the banks were using historically low interest rates to shore up their own finances and were not offering small firms affordable loans.

The Chancellor pointed to figures compiled by the Bank of England that revealed only 2 per cent of SMEs were paying more than 9 per cent over the base rate for credit in 2007. This year that number has climbed to a third.

The banks were informed that Lord Myners, the City Minister, would be inviting them over the coming weeks to present their lending books so that the government can determine how much is being charged for lending facilities to small businesses.

Were the Treasury to conclude that the profit margins on loans to SMEs are unfair and anti-competitive, the banks could be threatened with a formal enquiry from the Office of Fair Trading.

Mr Darling said: “It is very important that each and every bank knows that there is someone looking over their shoulder. I want to make sure that we have a competitive banking system in this country.”

Before the meeting, Lord Mandelson, the Business Secretary, had highlighted government worries: “The Chancellor and I are not satisfied that lending is as it should be, even now after this time that we have been operating our policies. We are also concerned about the cost of lending.”

Commenting on the meeting, David Frost, director general of the British Chambers of Commerce, said: “It will be business that drives the UK out of recession, but that can only happen if the banks are prepared to play their part. I am still hearing too many stories of small businesses being unable to access appropriate financing.

“The situation is complicated but the government certainly needs to keep the pressure up. Banks need to be transparent and open about their approach to lending to small firms.”

The Forum of Private Business (FPB) welcomed the Chancellor’s intervention but argued that many of the problems encountered by small firms in accessing finance are down to applications being decided by centrally-prescribed criteria rather than being considered on a case-by-case basis by local bank managers.

The FPB said it wanted to see a more devolved decision-making process adopted by the banks and bank managers given greater scope for using their own judgement and discretion when approving loans.

This, the business group contended, would help improve the flow of credit to small businesses and would prevent firms from being unfairly classed as high-risk.

Chris Gorman, a FPB spokesman, said: “One of the clear problems our members are reporting in relation to the banks is this perception that they are deciding applications according to an unfair ‘tick-box’ mentality.

“Many feel that their businesses are perfectly viable but are being denied loans or overdrafts because a computer somewhere says ‘no’. We want to see a return of the old-fashioned relationships between small businesses and their local bank managers.”

Doing so would encourage young people to take up places, especially with smaller firms.

The FSB said it wants the minimum wage for all apprentices to rise from £95 to £123 per week in order to increase the incentives for completing the training.

It also called for more to be done to help very small businesses participate in the apprenticeship system.

Micro firms in particular struggle with the administrative burden of setting up apprenticeships, organising training and securing financial support, the FSB claimed. To tackle the problem, funds from the government’s skills budget in England should be ring-fenced for those hardest to reach, smallest businesses that do not currently benefit from the funding or even know it exists.

Additionally, a national Group Apprenticeship Programme needs to be set up to link potential apprentices with firms looking for a trainee. The programme would find apprentices jobs and place them in employment, while also taking on the administrative burden for small firms.

John Wright, the FSB’s national chairman, said: “The majority of small firms would like to take on an apprentice but are put off by the administration involved, and the lack of financial support.

“In a survey of our members, 82 per cent said they would be in favour of an increase in the minimum wage for apprentices, which would give them more of an incentive to complete the traineeship and give employers a higher chance of serious applicants for the position. Small businesses are eager to do their bit and to take on new employees, but the government must step up and help them to tackle the problem of unemployment.”

HM Revenue and Customs (HMRC) launched its first ‘amnesty’, or Offshore Disclosure Facility (ODF), in 2007 and recouped some £400 million in unpaid taxes from 45,000 people holding undeclared offshore accounts with five leading banks.

Now HMRC has extended its investigations to include a further 300 UK and foreign owned banks.

As a result, it has launched a New Disclosure Opportunity (NDO).

Under the scheme, people who contact HMRC voluntarily will only face a penalty charge on undeclared, unpaid taxes of 10 per cent of what is owed.

In principle, HMRC are entitled to impose a fine of 100 per cent but is hoping that, as in 2007, the reduced penalty will encourage more account holders to come forward.

Higher rate taxpayers with offshore savings accounts need to pay 40 per cent tax on the interest that is generated, irrespective of whether the money is re-introduced to the UK. Basic-rate taxpayers must pay 20 per cent.

HMRC is also tracking tax owed on other assets such as holiday homes which have produced income from lettings.

To qualify for the capped penalty, taxpayers must contact HMRC between 1 September and 30 November to notify that they owe undeclared tax. Those notifying on paper can do so from 1 September to 30 November and those notifying electronically from 1 October to 30 November.

Anyone making an offshore disclosure on paper must get it to HMRC from 1 September 2009 to 31 January 2010 at the latest. Electronic disclosures can be filed from 1 October 2009 to 12 March 2010.

However, HMRC went on to say that people who were contacted during the 2007 amnesty, did not come forward then but do so now will have to pay a penalty of 20 per cent.

Those who continue to fail to declare their liabilities will face penalties from 30 per cent up to 100 per cent.

Stephen Timms, Financial Secretary to the Treasury, said: “I would urge anyone with offshore accounts holding untaxed income or gains to take advantage of this simple and straightforward scheme.

“Most offshore investors already pay the tax that the law requires and it’s only fair that everyone respects the rules.”

Dave Hartnett, HMRC’s Permanent Secretary for Tax, added: “I know there are people who regret not taking advantage of our Offshore Disclosure Facility (ODF) in 2007 which focused primarily on the customers of five large banks.

“Now everybody who has not paid the tax they should in relation to offshore accounts or assets has this New Disclosure Opportunity to pay what they owe with penalties on more favourable terms than normal.”

Mr Hartnett described the disclosure procedure as simple and straightforward but warned that this would “the last opportunity of its kind”.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), believes that HMRC will push hard to reclaim any taxes owing.

He said: “HMRC will dig a lot deeper if people do not disclose their income details or monies held in offshore accounts. It has the legal power to seek information from banks, so this really is the time to disclose, or face a penalty.

“As the country’s tax take is down, HMRC will be looking to pursue tax evasion in a more aggressive and structured way. This new initiative is a good use of HMRC’s resources.”

The Financial Services Authority (FSA) has announced that the compensation rules for savers and businesses are to be strengthened.

Changes to the Financial Services Compensation Scheme (FSCS), which safeguards savings and deposits up to £50,000, will see compensations paid more quickly.

Under the EU Deposit Guarantee Schemes Directive, payments must be made within 20 days.

However, the FSA said, as from 31 December 2010, it intends to introduce a new timetable that would refund individuals and small businesses within seven days. Other investments would be compensated for inside 20 days.

Another change to the system will ensure that savers get all of the money due to them up to the £50,000 threshold.

The current system means that for those customers who have both savings and a loan with a bank or building society, the deposit is used to pay off what remains owing on the loan, and the balance is then returned to the individual or business. If the debt is greater than the credit, they receive no compensation.

Once the changes come into effect, savers will be paid a ‘gross’ compensation; in other words, the full amount of their deposit up to £50,000 without any deductions for outstanding loans.

A further new rule which is to apply from 1 January 2010 will require banks and building societies to tell customers about the FSCS and the level of protection it offers to depositors.

The FSA has also extended, until 30 December 2010, its interim rules which allow separate compensation cover for customers with deposits in two merging building societies.

The same extension has been made for customers of a building society which merges with a subsidiary of another mutual society, and for customers whose deposits are transferred from a failed firm to another deposit taker where they already have an account.

Hector Sants, chief executive of the FSA said: “To help underpin confidence in our banking system, individuals and small businesses must feel confident that their money is well protected.

“The new rules will help deliver that confidence, build on the successful role of the FSCS to date, and aim to further minimise the potential hardship faced by depositors if an institution defaults.”