Employment costs – What’s changed?

In the recent emergency budget there were various changes to employment taxes which may effect your business and your staff.

As an employer I’m sure you’re used to your staff moaning about their pay and always angling for a pay rise, especially at the Christmas party! Well, there is going to be an increase in the personal allowance by £1,000 in 2011/12 to £7,475. This will effectively give them a pay rise so you don’t have to. Please be careful though, higher rate taxpayers will not benefit from this change because the basic rate limit will be cut.

If you are a new business in Lancashire, or in fact anywhere outside of London there is some great news regarding National insurance contributions.
Employers will not have to pay the first £5,000 of class 1 employer NICs that would otherwise be due in the first 12 months of employment. This new concession applies for each of the first ten employees hired in the first year of business.

The magic date is 22 June 2010 i.e. any new business setting up on or after this date will benefit from this NI holiday. The scheme will last for 3 years.

On the downside, National insurance contributions for employees and employers are increasing by 1% from 6 April 2011. This is to some extent mitigated by the announcement that the level at which employers start to pay NIC’s will increase by £21 per week above indexation. The cost of the combined measures will therefore be disproportionately borne by businesses employing relatively higher paid employees.