New Employment Allowance ‘inspires SMEs to expand’

May 29, 2013

One in five small and medium-sized enterprises (SMEs) will look to expand when the new national insurance Employment Allowance comes into effect, according to new research.

In a survey by the insurer Direct Line for Business, 20% of respondents said they were more likely to grow their business after the allowance is introduced in April 2014.

A further 33% of firms claimed they would be more likely to take on additional staff due to the lower cost of employment.

Under the plans, employers and charities will be entitled to a £2,000 Employment Allowance towards their national insurance costs. The allowance will be deducted from their employers’ national insurance contributions (NICs) liability over the course of the year’s PAYE payments.

The measure, which was unveiled in the 2013 Budget, is expected to take out around 450,000 small businesses from paying NICs.

‘It is encouraging to see that so many UK businesses are looking to expand,’ commented Jazz Gakhal, head of Direct Line for Business. ‘The Government’s decision to reduce the financial burden for small companies is a welcome boost for owners and managers across the country.’

Meanwhile, Helen Dickinson, Director General of the British Retail Consortium said: ‘We called for a time-limited national insurance holiday, as an easy way to encourage businesses to take on young unemployed people. Existing incentives are cumbersome and not being taken up.

‘The Employment Allowance will help many small businesses with the cost of taking on staff. But it won’t incentivise larger businesses, which also have a vital role in creating jobs’.


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