Employment Allowance should be extended to domestic employers
25 February 2014
The Chartered Institute of Payroll Professionals recently conducted a survey in respect of National Minimum Wage. During the promotion CIPP members asked the policy team why the new Employment Allowance was not open to domestic employers.
Some respondents acknowledged whilst increasing the NMW wage would be good for the economy and potentially encourage people off benefits and into work, the financial impact on the SME could conversely lead to a reduction in staff due to the profit margins shrinking too low. The change from April 2014 is the introduction of an Employment Allowance providing up to £2,000 employer National Insurance relief, though this allowance doesn’t extend to the domestic sector. In response to the NMW survey it was asked, if the NMW rises in October along with other employment costs will parents continue to employ nannies enabling them to work, or will it become more cost effective for one parent to stay at home?
Karen Thomson, Associate Director of Policy, Research & Strategic Visibility said:
“Legislation is meant to be actively encouraging all back to work, so the CIPP is surprised to see a Policy that does not actively promote this. The government also says it wants a fair tax system, is excluding this sector who contributes with employer’s National Insurance fair? The CIPP therefore urges the government to also consider extending the Employment Allowance to all employers (except the public sector) which the CIPP believes will help an already struggling industry.”
In support of this extension one of the CIPP members, responsible for assisting parents by providing payroll services to them, Helen Harvey, Payroll Services Director for NannyTax said:
“We are extremely disappointed that the government has decided to exclude domestic employers from applying for the new employment allowance. With the lack of affordable childcare, and pressures on family income, many parents have to work whilst bringing up their children, and employing a nanny is the only option available to them, especially if they have to work shift patterns such as nurses and police. We are also concerned by the timing of this, as it coincides with the removal of the Percentage Threshold Scheme, which these small employers relied upon when their employees were ill, and the rising cost of implementing automatic enrolment which is just around the corner.”
Also in support of this extension is Alison Hull, FCIPP, Director, NannyMatters and The Pay Team who said:
“The Employment Allowance is welcomed wholeheartedly by small employers, but it does leave us with a most unfair and unreasonable state of affairs for domestic payrolls: disabled people who employ carers or personal assistants are expected to pay full Employer National Insurance contributions, but businesses large and small get £2,000 off. The same applies for nannies, who are almost exclusively employed specifically so that skilled parents can return to the workforce and generate business growth.
The situation is made even worse with the abolition of the Percentage Threshold Scheme. From 6th April these same employers are expected to meet the cost of up to £2,451 of SSP paid out.
Unfortunately, this type of employer has no say in HMRC’s decisions-making. David is up against Goliath, and really doesn’t stand a chance. It looks like HMRC will not rethink until a case hits the headlines.”
The CIPP would urge the government to reconsider extending this allowance to all but the public sector employers to ensure fairness for all.
For more information please visit: www.cipp.org.uk