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Business and Budgets

This week we’ll learn what the Chancellor’s budget contains. Mr Osborne like many before him always says that he’s going to help business. (I have yet to hear a Chancellor say that he plans to make life even more difficult for businesses).

Businesses have a variety of needs. From an HR point of view there are several areas were I’d like to see some practical help for businesses.

The first is the cost of employment. It has to be more affordable to appoint new recruits. For example, it might be helpful to allow greater flexibility in the use of internships. Now that many internships have to viewed as an employed position requiring the payment of the national minimum wage, holiday etc, the cost can be prohibitive and prevent or slow down the growth of micro or small businesses. It might be helpful for small businesses to be able to work with interns for an introductory period before the rights to minimum wage apply.

Employers find that working with apprentices is effective and practical – when they get there, that is. It’s not always easy to get started. Many employers have complained that government apprenticeship schemes has been hard work, far too bureaucratic and with a lack of buy-in from schools. What can the Chancellor do to address the problems so these initiatives deliver results for both young people and small businesses.

Staying with the education theme, young people need to have their workplace expectations set in a practical and realistic way. While many employers, including us (talk to us about our Build and Fly Your Own Rocket programme) are working with schools to help address the gap, it would be helpful if there is more strong careers advice. Funding could be allocated to help build links between education and employers.

Tax is a big one too. Employers hate NICs and it’s often described as a tax on job. At present NI is paid for each employee, at a rate of 13.8%.

There are regular calls for the starting point for NI to be raised to match income tax, and merging the two systems into one. As unemployment among young people remain high, the Chancellor may bring forward his promise to remove employers' NI for the under-21s. This would affect around 1.5m jobs, saving companies around £500m in tax. The change doesn't come in until 2015, and there is now speculation it may be brought forward to April 2014.

The CIPD’s Chief Economist, Mark Beatson, has an additional take on NICs. “Employers pay NICs on the salaries of their employees – it’s a percentage which changes according to salary. If you earn less than the threshold (£148 a week) you pay nothing in employer NICs. But as soon as you hit the threshold you pay that percentage on the full salary. If you’ve got part-time workers, it makes sense to keep them earning just under £148 a week so you avoid paying NICs. And for employers paying the national minimum wage, the incentive is to make sure people’s hours stay within the NICs threshold limits. You have a lot of people who might have been stuck under the £148 threshold, who would quite like to move their hours up a bit. Increasing the threshold to £220.85 a week will let them do that.”

We shall soon learn what the Budget contains. Let’s keep our fingers crossed for some commonsense solutions!

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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