George Osborne explained that the Government was taking tax off jobs, which is a measure that is likely to help small businesses who want to hire their first employee or expand their workforce.
It was revealed that from April 2014, all businesses and charities will be eligible for the new allowance, which will reduce their National Insurance contributions (NICs) bill.
The Government say that up to 2.5 million employers will benefit, while 450,000 of the country’s smallest businesses will no longer pay any employer NICs.
According to the treasury, employers with fewer than ten members of staff will see their employer NICs bill reduced by £805.
Commenting on the announcement, Alex Jackman, Head of Policy for the business lobby group, the Forum of Private Business, said:
“We’ve been calling for a scheme like this for a number of years now, so our only disappointment with this is that it’s 12 months away, and that’s a mighty long way off.
“While business will love the concept, the fact that no financial benefits will be felt until April 2014 somewhat takes the shine off it. Still, it will allow for businesses to prepare and plan ahead.”
“The bottom line here though is that this initiative will have a double function. That is to either incentivise employers to take on more staff, or to take the saving and boost their profitability. For many small firms who’ve been operating on extremely small margins the latter would be welcome relief.
“For businesses looking to grow though, it means they’ll be able to employ an additional employee earning £22,400, or an additional four employees working full time on the adult minimum wage without any increase in their employer NICs. That’s got to be good for employment figures and therefore the wider economy.”
The Federation of Small Businesses (FSB) has also warmly welcomed the Government’s moves to create an employer’s allowance, calling it a bold move from the Chancellor and stating that it believes it will give small firms the confidence to create thousands of new jobs in the private sector.