HR should be getting first dibs on NIC savings

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With the government announcing that it would help employers and young people out by offering a National Insurance contributions (NIC) tax break to any firm employing under-21s, now is the time for HR departments to make the case for a budget increase. 

It was December 2013 when George Osborne made this announcement, but the changes won’t come into effect until April of 2015, making this the perfect time to be getting clued up on what it all means. From April next year employers will no longer have to pay NICs on any under-21-year-old that they employ, so long as that young person is earning under £42,285.

The idea behind the change is quite simple: to encourage employers to hire young people and the early signs from employers are that this objective will be achieved. There are many recruitment drives for young people set for next summer and it has been estimated that employers will save £500 annually per under-21-year-old on £12,000 pa that they hire.

There is clearly a windfall to be made for UK companies when these changes come into play and it is unclear where that saving should be funnelled back to. 

I think HR departments have a stronger claim to the spare cash than any other department and smart, eager and informed HR Directors can certainly make the case for all of, if not a large percentage of, the saving to be funnelled back into the next HR budget – a budget which is for most firms being negotiated at this very point in the year. 

Whether HR uses that money to increase recruitment, to spend more on training and developing their younger staff or for any other HR operation, I think that saving should stay within the HR department. 

The case for HR to ask for a budget increase in light of the NIC tax break is a strong one and shouldn’t, in all honesty, be that difficult to make.

It might surprise you, but few company directors will actually even be aware of this upcoming change. Don’t get me wrong, many will of course know there is a change coming, but those directors with a tendency to be found with their heads in the clouds won’t and by bringing the changes to their attention at this stage, HR Directors can demonstrate their awareness and, in simple terms, get in there before anybody else does. 

The fact that the extra cash could – and for most firms probably will – go back into recruitment also makes this an HR issue. The simple maths says that for every 24 under-21s that an HR department hires it can afford to hire one more for essentially no extra cost.

Similarly, the saving could be funnelled into learning and development and although the principal aim of the government was to increase the number of young people in work, using that saving to provide those already in work with superior training is not a bad outcome at all. Company directors with a long-term focus will see the benefits of this and it should be easy enough to convince them that your HR department could benefit with having that cash put towards L&D. 

There isn’t any time to spare since the sooner your HR department gets in there with a researched and practical proposal for how to use those NIC savings, the better its chances at seeing a budget increase. The changes come into force next April, but you can stake a claim to that money for your HR budget long before then. 


 

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