£2,000 national insurance allowance for employers

Budget 2013: The government has announced that all employers will get the first £2,000 taken off their national insurance contribution (NIC) bill.

George Osborne said that the reform, aimed at small organisations, will come into effect from April 2014.    

The Chancellor has labelled the policy the employment allowance.    

He gave the example that an employer can hire a staff member on £22,000 and pay no NICs.

This is because the allowance of £2,000 per year for all organisations and charities will be offset against their employer NIC bill.    

But under salary sacrifice arrangements, where an employee loses some of their contractual entitlements, employers can already lower their NICs.    

John Wilson, head of technological services at consultant JLT, said: “The chancellor did not, as some people speculated, stop salary sacrifice.   

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“Even the organisations who are entitled to the employment allowance will still have to pay NICs. Because of this, salary sacrifice will still have a role in offering further NICs savings for employers and employees.”