Class 1 employer National Insurance contributions represent a significant outlay for businesses, levied at 13.8% on all earnings above a certain threshold. Indeed, this is a rate that has remained the same for several years.
But there are ways for an employer to legitimately mitigate those National Insurance contributions (NICs), while at the same time benefiting the business and giving employment to different groups of people. Here are three options, one or more of which may work for your business.
Introduced in April 2021, there is now an NI ‘holiday’ for employing military veterans.
The relief is available for 12 consecutive months from the veteran’s first day of civilian employment, and the zero-rate can be applied up to the upper secondary threshold, of £967 per week.
For this financial year (2021/22) the employer pays the Class 1 NICs as normal, later claiming them back. From April 2022 onwards, employers will be able to apply the relief in real time through PAYE.
Employers can claim relief even if the employment started before 6 April 2021 but will only be able to claim for the remaining 12 month qualifying period. The first day of employment is taken as the date of the employment contract between the employer and the employee.
To qualify, a veteran must have served at least one day in the regular armed forces, including anyone who has completed at least one day of basic training. It doesn’t matter when they left the regular armed forces, as long as they haven’t been employed in a civilian capacity.
Another way to gain National Insurance relief is to employ apprentices.
To qualify, they must be under the age of 25 and be following an approved UK government statutory apprenticeship framework.
The relief means you may no longer need to pay Class 1 NICs up to the apprentice upper secondary threshold – the equivalent of weekly earnings up to £827 (£43,000 a year).
There are a number of links you can follow to check the apprentice is in a statutory apprenticeship framework – more information here.
You will also need to provide evidence to HMRC, and this can take the form of a written agreement between you, the apprentice and a training provider, or (in England and Wales) evidence that the apprenticeship receives government funding.
As well as saving on NICs, there is a clear social and economic benefit in employing young people, whose age group has been particularly badly affected by unemployment caused by the pandemic.
The Kickstart Scheme is a way for businesses to take on recruits and have the costs fully funded by the Government. It’s open to people aged 16 to 24 who are claiming Universal Credit.
Any employer taking on staff via the Kickstart Scheme can expect the wages (National Minimum Wage or National Living Wage, depending on their age) to be paid by the Government for up to 25 hours per week, for up to six months.
On top of this, the NICs and minimum automatic enrolment pension contributions are covered.
Employers can spread the start date of the job placements up until the end of December 2021. Further funding is available for training and support, so the young people on the scheme can get a job in the future.
Applying for the Kickstart Scheme is via the Kickstart Gateway – more information here.
Three clear ways to save money on employer National Insurance contributions, while at the same time increasing a business’s head count by offering work. If you need any general help with tax planning for your business, please contact me, Michael Blaken, or any of the the Optimum accountancy team, based in Swindon and Cheltenham.