For UK employers, who face a myriad of obligations, responsibilities and challenges in the course of hiring and retaining employees, the Employment Allowance can be a vital financial aid.
This blog explores the importance of understanding the Employment Allowance, and how it can positively impact your business.
What is the Employment Allowance?
The Employment Allowance was introduced back in 2014 to stimulate economic growth and job creation. It is a government initiative designed to support employers by reducing their Class 1 National Insurance liability.
Eligible employers are able to claim up to a specific amount, which can help offset the cost of expanding their workforce.
Are you eligible?
According to HM Revenue & Custom’s latest statistics, around 1,171,000 employers benefitted from the Employment Allowance in the 2022/23 tax year. However, it’s likely that many businesses still do not understand their eligibility.
You may be eligible for the Employment Allowance if:
- You are a business or a charity
- Your employer’s Class 1 National Insurance liability did not exceed £100,00 in the previous tax year
Special rules apply to companies that are part of a group, and those operating multiple payrolls. More detail can be found on the GOV.UK website, here.
Public bodies and businesses conducting the majority of their work in the public sector (such as local councils and NHS services) are unable to claim.
You also cannot claim if both of the following apply:
- you’re a company with only one employee paid above the Class 1 National Insurance secondary threshold
- the employee is also a director of the company
It is also worth bearing in mind that certain employees cannot be included in your claim, such as:
- someone whose earnings are within IR35 ‘off-payroll working rules’
- someone you employ for personal, household or domestic work (i.e., gardener) – unless they’re a care or support worker
Benefits of the Employment Allowance
Saving money whilst expanding your workforce
The primary benefit is the potential for significant cost savings. The allowance gives employers the opportunity to reduce their Class 1 National Insurance contributions up to an annual limit set by the Government (£5,000 for 2023-24).
For SMEs who are keen to create jobs and grow their organisation by expanding the workforce, this saving can eliminate some of the financial constraints they might otherwise face.
Simple claims process
The process of claiming the Employment Allowance is relatively straightforward. If you already outsource your payroll function then your service provider can help you. They will ensure that details of a claim are included via your Real-Time Information (RTI) submission to HMRC.
How can GH Payscheme help?
Employers who understand and take advantage of the Employment Allowance can enjoy a healthier bottom line and a more robust workforce, contributing to economic growth and stability in the UK.
If you think you meet the necessary criteria to make a claim for Employment Allowance, but you are unsure where to start, or if you need wider support with outsourcing your payroll, contact our dedicated, BACS-approved bureau today.
