Today’s Budget reports that from April 2014, every UK business and charity will be entitled to a £2,000 Employment Allowance towards their bill for National Insurance contributions.
The move is estimated to save the charity sector around £45m a year collectively, according to HM Treasury predictions.
The Budget report says that up to 1.25 million employers will benefit, with over 90 per cent of the benefit going to small businesses.
“The Employment Allowance will reduce the cost of taking on new staff for small businesses, supporting those with ambition to grow by hiring their first employee or expanding their workforce,” the report reads.
“Every business will be able to employ one worker on a salary of £22,400, or four employees working full-time on the new adult National Minimum Wage, without paying any employer NIC at all.”
A Treasury spokeswoman told civilsociety.co.uk that the voluntary sector is set to save around £45m from this move.
This was explained as the £2,000 being grossed up across the estimated 35,000 eligible charities to £70m, with cases where employers will not take up the entire £2,000 allowance or not take on any extra employees at all accounting for the £25m difference.
The Budget statement goes on to say that in total, approximately 450,000 of the UK’s small businesses will no longer pay any employer's NIC, and that on average, employers with fewer than ten staff over the course of the year will see their employer NIC bill reduced by 80 per cent.
The Employment Allowance will be delivered through standard payroll software and HMRC’s Real Time Information system. To enrol, employers will only need to confirm their eligibility through their regular payroll processes.
NCVO: ‘Allowance is a nice surprise’
Karl Wilding, head of policy and research at NCVO, said that the £2,000 Employment Allowance came as a “rabbit out of the hat – a very good one”.
“If we’re honest, the Chancellor primarily has the private sector in his sights when he’s thinking about employment creation,” Wilding told civilsociety.co.uk, “but of course we welcome this and absolutely see that voluntary organisations are part of the growth solution.”
