How Do You Intend To Spend Your HR Department’s National Insurance Saving?
It was announced last December that the government would offer a tax break to any firm employing under-21s by abolishing employers’ National Insurance contributions for that age group. With the hospitality industry hiring a large percentage of workers from that age group, there are plenty of potential savings to be made.
The hospitality industry prides itself on its young workforce and that certainly shows in recent figures which showed that 38% of hospitality businesses had recruited 16 year olds from school while 55% had recruited 17-18 year olds from school – significantly higher than figures from other sectors within the UK economy, which were 28% and 39% respectively. In fact, the British Hospitality Association recently announced 6,000 new jobs for young people by the end of the year as part of plans for young people to take 20% of the 300,000 jobs that will need filled in the hospitality sector by 2020.
This all means that hospitality stands to benefit more than most industries from George Osborne’s announcement last December that the government would scrap the National Insurance contributions paid by employers for under-21s earning under £42,285 from April of next year.
As of April 2015, these NI contributions will be gone and the saving for employers is estimated to be £500 on the cost of employing an Under-21-year-old earning £12,000 pa, whilst those on £16,000 pa will see that doubled.
This raises the question: What will employers do with that saving in the industries such as hospitality which stand to benefit most?
Hire More Workers
One way in which employers could use the savings to their benefit could be to hire more young people. This is the government’s stated policy aim. Simple maths means that for every 24 under-21s that a company hires, it can afford to hire one more at essentially no extra cost.
This can only be great news for the hospitality sector which is always keen to recruit and develop youngsters’ potential, enabling emerging talent to shine.
Improve Employee Benefits Offering
Human Resources managers would love the chance to increase the employee benefits offered to their staff as the advantages of having a competitive benefits package are obvious.
Getting the increase in budget to do that is, however, rare. Yet, for an industry such as hospitality which already hires so many under 21-year-olds, the new rules on employers’ NI payments means that hospitality chains are essentially making a massive saving per employee when the scrapping of under-21s NI contributions comes into play.
Wise and on-the-ball HR Managers can make the most of this opportunity by asking for at least a percentage of the savings that will be made to go towards employee benefits packages. In fact, one of DAM's clients is planning to do exactly that having already calculated that the savings will be enough to fund a group life insurance scheme for the company.
Whether the savings could fund an increase in corporate pension contributions, a new flexible benefits scheme, or a better group risk policy, there will be a lot of “free cash” up for grabs in hospitality companies come April 2015 and HR departments should be making a case to see some of that funnel into their next budgets.
Photo credit goes to HowardLake
For more discussion on this topic, see Russell's article on HR Bullets.