From 6 April 2015 employer’s National Insurance (NI) Contributions have been abolished for employees aged under 21. The government estimates that this will benefit the employers of nearly 1.5 million individuals at a cost of £450 million in 2015/16 rising to nearly £600 million by 2019/20.
The aim of the measure is to encourage businesses to employ young people and builds on the £2,000 employment allowance introduced in the previous tax year.
Employers will no longer need to pay Class 1 NI contributions for employees aged between 16 and 21 up to the Upper Secondary Threshold (£815 per week for 2015/16). Any earnings above this will be calculated using the standard rate of 13.8%.
Seven new NI categories have been introduced to accommodate this change, one of which must be selected by employers for those employees within the relevant age bracket.
The employee will still be required to pay NI on their salary.
What are the potential savings?
The government has estimated an average saving for employers of £332 per employee per year. The actual saving could quickly increase, however, depending on the employee’s salary. For example, an individual with a salary of £15,000 would result in savings of nearly £1,000 per annum for their employer.
From 6 April 2016 this exemption will be extended to apprentices aged under 25.