Employer’s national insurance

We’re all by now conscious of the threat of an impending increase in the 13.8% employer’s national insurance (NI) rate in the upcoming Budget.

When you employ a member of staff, your company will usually have to pay NI on the salary as follows:

The first £9,100 p.a. – 0%

Everything above £9,100 p.a. – 13.8%.

It’s widely anticipated that the 13.8% rate is going to increase.

Hiring several part-timers, maybe doing a day a week each, all earning £9,100 is an obvious way to avoid paying any NI. Perhaps your business could benefit from having a number of older, semi-retired workers, bringing in a wealth of skills and experiences. A day a week might suit them.

And there are other categories of staff who your business could employ who would be ‘cheaper’ in terms of NI for you.

You don’t start paying NI on the salaries of most staff working in freeports or investment zones unless they’re earning more than £25k a year.

And for the following groups, NI doesn’t kick in until the employee is earning in excess of £50k a year:

• Employees under 21
• Apprentices under 25
• Veterans, working in their first job since leaving the armed forces

So, the increase in the NI rate might influence your recruitment strategy. But what about your existing team? Giving them a pay rise just means yet more NI for you – and they will suffer either 20% or 40% income tax on it as well as more (employee’s) NI – either at 6% or 2%.

Maybe now is the time to give some serious thought to alternative ways of rewarding staff, outside of the usual ‘wages and salaries’ route. So, here are some ideas of things your company can pay for (and get corporation tax relief on) that doesn’t result in yet more NI and doesn’t get taxed on the employee. Maybe you should throw some of these into the benefits pot, rather than increasing salaries. Or maybe even reduce salaries (and NI costs) and offer some of these instead.

• At the time of writing – pension contributions made for employees; but this could change from 30^th October
• £50 gift vouchers (using the ‘trivial gifts’ exemption)
• Encouragement awards – £25 for each idea or for special effort
• Financial benefit awards of up to £5,000 for suggestions that will improve business profits
• Christmas parties (up to £150 a head, including VAT)
• Company mobile phone (contract in the company’s name)
• Workplace parking – either at or ‘near’ the workplace
• Staff meals – sandwiches, snacks and drinks could be provided for the whole team (they must be available to all staff)
• Home office equipment – laptop, desktop, desk, chair, etc.
• Overnight expense allowances – pay staff HMRCs approved rates when they’re away on business
• Relocation costs – up to £8,000 for staff moving closer to the workplace
• Provision of a workplace nursery
• One health screening a year
• One private medical check-up a year
• Eye tests
• Spectacles for work use
• Bike and cycling safety equipment if used mainly for travel to/from work
• Interest-free loans of less than £10k throughout the year
• Expenses incurred in the provision of any death in service life assurancelump sum, gratuity, or similar benefit given to an employee or to any member of the employee’s family or household on the employee’s death (no longer capped at x 4 salary)
• Uniforms and protective clothing – could you have a corporate uniform?
• Subsidised public transport so long as available to all staff
• Sports facilities or gym made available to employees which are not available to the general public
• Using the company’s purchasing power to buy discounted goods/services where the employee reimburses the company
• ‘Credits’ like air miles used personally by staff resulting from business purchases
• Mileage allowance paid for business mileage in the employee’s personal car
• Work to home travel when working late (e.g. taxi)
• Counselling services
• Re-training prior to redundancy
• Business trips where there may be ancillary perks

And don’t forget the provision of a company electric car – with only a tiny tax impact on your employee and very little NI for you to pay on the benefit. 

Food for thought – and maybe time to get creative!