Short term employee

[Newchodge]

If the Finance Bill is passed employers will have to pay NI on salaries over an annual threshold of £5,000. An Employer's National Insurance Allowance of up to £10,500 will be available to employers so smaller employers may pay no employer's NI.

The position is different for single director employers, with no other employees paid above the secondary threshold, which will be £5,000 or about £417 per month or about £97 per week.

I have always understood that employing someone for a very short time and paying them over the secondary threshold for that time would allow the company to claim Employer's Allowance. Does anyone think that may be an issue going forward?

 

[MyAccountantOnline]

If the Finance Bill is passed employers will have to pay NI on salaries over an annual threshold of £5,000. An Employer's National Insurance Allowance of up to £10,500 will be available to employers so smaller employers may pay no employer's NI.

The position is different for single director employers, with no other employees paid above the secondary threshold, which will be £5,000 or about £417 per month or about £97 per week.

I have always understood that employing someone for a very short time and paying them over the secondary threshold for that time would allow the company to claim Employer's Allowance. Does anyone think that may be an issue going forward?

I've not seen anything yet to suggest it'll change going forward.

 

[numbersrule]

I only recently became aware of this loophole, ie the possibility of paying someone temporarily just to meet the threshold. But in my opinion, such a course of action would seem far too much hassle for what would be a small saving.

For example, a sole Director being paid £12,570 per annum would result in EMPNICS of £40.02 per month in 2024-2025. ( Based on 1,048 - 758 = 290 x 0.138 = 40.02 ).

Compare that with 2025-2026 assuming the same basic salary to minimise personal tax of £12,570. That would result in monthly EMPNICS of £94.80.
( Based on 1,048 - 416 = 632 x 0.15 = 94.80 ).

94.80 x 12 = 1,137.60

Given the onerous nature of employing someone, even for a short time, does it actually make sense if it is only saving a little over 1k? I'd rather be focusing on doing my job properly, because I will save far more that way as opposed to being distracted by time consuming futility.

In any event, it seems to me, the way it should work is that the company should only be able to claim Employment Allowance for the period it is eligible, surely? When a temporary worker leaves, the company should be no longer eligible and the allowance paid for the qualifying period only.

 

[Newchodge]

I only recently became aware of this loophole, ie the possibility of paying someone temporarily just to meet the threshold. But in my opinion, such a course of action would seem far too much hassle for what would be a small saving.

For example, a sole Director being paid £12,570 per annum would result in EMPNICS of £40.02 per month in 2024-2025. ( Based on 1,048 - 758 = 290 x 0.138 = 40.02 ).

Compare that with 2025-2026 assuming the same basic salary to minimise personal tax of £12,570. That would result in monthly EMPNICS of £94.80.
( Based on 1,048 - 416 = 632 x 0.15 = 94.80 ).

94.80 x 12 = 1,137.60

Given the onerous nature of employing someone, even for a short time, does it actually make sense if it is only saving a little over 1k? I'd rather be focusing on doing my job properly, because I will save far more that way as opposed to being distracted by time consuming futility.

In any event, it seems to me, the way it should work is that the company should only be able to claim Employment Allowance for the period it is eligible, surely? When a temporary worker leaves, the company should be no longer eligible and the allowance paid for the qualifying period only.

As the rules stand, the full allowance is available if there is any liability for paying employer's NI for anyone who is not a sole director for any pay period.