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Posted by Sarah Brown on 20 Mar '13

Something you might need to do immediately about the budget - and it's not about beer

If you tender for public sector business or plan to, or get a grant as a charity then you need to think about your allowance for inflation in salaries plus updating your forecasts from April 2014 to reflect the new Employment Allowance

I happened to be driving today when the Chancellor was presenting his budget in the Commons. Generally I don't listen to it all and like most people let the accountants and commentators identify the highlights for me. For the people we work with that's the consultation on gift aid and digital giving, the new tax relief for social investment and a cut in employers' national insurance contributions.

However as I listened something else struck me. In the business plans that I do for clients I allow 3% per year for inflation which tends to average out correctly and ensure that when bidding for money or tenders cost increases are covered. However yet again, except for the armed forces, the public sector is being held to a 1% salary rise - you need to at least think about it if you put in more because that is what you want to give your staff. Is it tactful to expect your staff to get 3% increase paid from the public sector budget when public sector staff are held to 1%? Just a thought

Also if you are small and thinking about growing then today’s Budget is good for you as from April 2014, every UK business and charity will be entitled to a £2,000 Employment Allowance towards their bill for National Insurance contributions.

The Budget report says that up to 1.25 million employers will benefit, with over 90 per cent of the benefit going to small businesses and charities saving around £45m a year collectively, according to HM Treasury predictions.

“The Employment Allowance will reduce the cost of taking on new staff for small businesses, supporting those with ambition to grow by hiring their first employee or expanding their workforce,” the report reads.

“Every business will be able to employ one worker on a salary of £22,400, or four employees working full-time on the new adult National Minimum Wage, without paying any employer NIC at all.”

A Treasury spokeswoman told civilsociety.co.uk that the voluntary sector is set to save around £45m from this move.

This was explained as the £2,000 being grossed up across the estimated 35,000 eligible charities to £70m, with cases where employers will not take up the entire £2,000 allowance or not take on any extra employees at all accounting for the £25m difference.

The Budget statement goes on to say that in total, approximately 450,000 of the UK’s small businesses will no longer pay any employer's NIC, and that on average, employers with fewer than ten staff over the course of the year will see their employer NIC bill reduced by 80 per cent.

The Employment Allowance will be delivered through standard payroll software and HMRC’s Real Time Information system. To enrol, employers will only need to confirm their eligibility through their regular payroll processes.

PS just a reminder - remember Real Time Information for HMRC comes into force next month and every organisation that pays PAYE needs to use it even if you are small and don't take a salary from your company every month you need to say I'm not taking a salary.