April 10, 2014
The Employment Allowance initiative is now up and running, but many firms are still in the dark about it.
Businesses can now save up to £2,000 of employer's National Insurance (NI) contributions per year thanks to the Employment Allowance. Prime Minister David Cameron has written to almost two million businesses to tell them about the initiative.
The allowance is designed to cut the NI costs of existing employers, as well as encouraging some self-employed people to grow their businesses by taking on their first employee.
However, a survey by the Bank of Cyprus has found that many UK firms are either indifferent or oblivious to the Employment Allowance. Its poll of 500 owner-managers found that 44% said while they welcome the cost reduction it will make "no real difference to their business", and 30% said they were not aware of it at all.
Tony Leahy at Bank of Cyprus UK said: "At a time when small businesses need government support to help nurture them through a fragile economic recovery, it is a concern that a significant percentage of businesses are not aware of this initiative."
According to government advice, the new allowance will enable a small business to hire the following staff without paying any employer's NIC:
Frank Haskew, head of the tax faculty at The Institute of Chartered Accountants in England and Wales (ICAEW), said: "The fact that the entire allowance can be claimed up front, at the start of the tax year, rather than presented as a monthly reduction, is good news. This will make the implementation much more straightforward for businesses."
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." Check your eligibility and find out more on the GOV.UK website.