Employers say tax break will help them hire

Marion Dakers
THE PLANNED cut in national insurance payments for employers is making one in three small- to medium-sized companies more optimistic about hiring staff, according to figures out today.

Chancellor George Osborne said in his March Budget that the government will waive the first £2,000 on employers’ national insurance bills from April 2014.

The so-called employment allowance is set to save companies £5.9bn between 2014 and 2018 and a third of employers will no longer pay national insurance contributions, according to government estimates.

A third of smaller firms are now looking to recruit thanks to the resulting lower cost of employment, Direct Line for Business claimed in a study published today. A further one in five small companies have been encouraged to expand.

“The government’s decision to reduce the financial burden for small companies is a welcome boost for owners and managers across the country,” said Jazz Gakhal, head of Direct Line for Business.

When the National Insurance Contributions Bill was confirmed in the Queen’s Speech earlier this month, the Federation of Small Businesses said the measures should “help small businesses wary of the cost of employment to take on staff and help those that currently employ to free up funds to expand and grow”.

The plan is similar to a temporary national insurance contribution holiday for new businesses outside London, which was introduced by the coalition in 2010.

That scheme intended to help small firms take on more staff at a time when the unemployment rate had shot up to 7.9 per cent. The rate rose to the same level at the start of 2013.

National insurance, a tax paid by both workers and employers, funds certain state benefits, pensions and the NHS. The coalition has attempted to reform the levy since being elected three years ago.