Give National Insurance Holiday to More Firms, says FSB

Offering more firms a National Insurance holiday for taking on new staff would breathe fresh life into a faltering job creation scheme, the Federation of Small Businesses (FSB) has said.

Since September 2010, first-year start-ups in certain regions have been allowed to claim up to £5,000 in National Insurance contributions (NICs) per employee for their first ten recruits. The three-year scheme is meant to boost private sector job creation outside London, the South East and the East of England. But take-up has been low.

The holiday was introduced to compensate for the loss of public sector jobs in areas with low private sector job creation. The Government’s assessment indicated that 400,000 businesses would claim relief over the three years of the scheme, and they budgeted £940 million to meet the costs.

However, secretary to the Treasury, David Gauke, told Parliament in early May that just under 3,000 businesses had been given an NICs holiday between 6 September 2010 and 28 March 2011. So far the scheme had cost just £5 million, Gauke admitted.

The FSB has now called for the holiday to be extended to enable existing firms with up to four staff to take on three more without NICs in the first year. The business body has also urged the Government to scrap the geographical restriction.

Their call comes in the wake of a member survey showing that 31 per cent of small firms nationwide would be more inclined to employ new staff if they could save money with reduced NICs.

“Small businesses want to employ, but need incentives to do so.”

said the FSB’s national chairman, John Walker.

“The Government must extend the NICs holiday to existing businesses if small firms are to help tackle unemployment.”

However, an HM Treasury spokesman said the Government had no plans to increase the scope of the offer, but that HM Revenue & Customs (HMRC) had commissioned a report that would look at the reasons for the low take-up.

“Most start-ups are sole traders.”

said FSB spokeswoman, Sara Lee.

“Not many businesses will take on staff in their first year, unless they’re in the service sector, such as a shop or restaurant.”

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