Is your business failing to benefit from the Employment Allowance?
The Employment Allowance came into force on 6 April 2014 – a Government initiative to encourage employers to take on more staff.
Thanks to the Employment Allowance businesses can now save up to £2,000 of employer’s National Insurance contributions (NICs) each year.
In the lead up to the initiative the Prime Minister David Cameron wrote to two million businesses to ensure they know about it and how to go about claiming it. But many firms appear to be still in the dark about it.
A recent survey by Bank of Cyprus UK found that UK firms of 30% said they were not aware of it at all many are either indifferent or oblivious and 44% said while they welcome the cost reduction it will make "no real difference to their business",
What is the Employment Allowance?
The allowance allows certain existing employers to forego their first £2,000 of Employers National Insurance contributions, meaning around 450,000 of the UK’s smallest businesses will no longer have to pay Employer NICs at all.
If eligible businesses can reduce their employer Class 1 NICs by up to £2,000 each tax year.
According to government advice, the new allowance will enable a small business to hire the following staff without paying any employer's NIC:
- Four adults on the minimum wage; or across
- Ten 18-20 year olds; or
- One adult on £22,000 per annum.
HMRC anticipate that small employers with fewer than ten employees over the course of the year will see their employer NIC’s bill reduced by 80 per cent.
The government has estimated that a third of all employers will see their NICs bill abolished. In his letter to businesses, David Cameron wrote: "Businesses are saying to us they want to invest, grow, and take on new people. The Employment Allowance is about helping you to do that."
The process is simple, says Cameron – "All you have to do is tick a box on your payroll software."
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