Cuts in NICs would encourage job creation

Small firms would be more likely to take on new staff if they were given the incentive of a reduction in national insurance contributions, a new survey has suggested.

According to the Federation of Small Businesses (FSB), almost a third of respondents to the poll (31 per cent) said that cutting NIC payments for the first six months of employment would encourage them to recruit more staff.

The Government introduced a NIC holiday for start-ups that employ up to 10 employees in 2010, but the FSB believes this does not go far enough. The FSB urged the Government to extend the holiday scheme to existing firms with up to four members of staff that take on up to three new employees. 

Similarly, the FSB called for more help to be given to firms seeking to offer places to apprentices and interns. Some 29 per cent of respondents said increased support would encourage them to set up such training places. 

The survey, which took in 1,700 businesses, also identified other areas that are having a negative impact on the ability of small firms to develop and expand.

These include uncertainty over contracts (37 per cent), the state of the economy (33 per cent), cash-flow (31 per cent) and access to finance as well as the cost of credit (16 per cent).

John Walker, the FSB’s national chairman, commented: “We have been saying for some time that small businesses would be encouraged to take on staff if National Insurance Contributions were reduced. Small businesses want to employ but have told us that they need incentives to do so. The Government must extend the National Insurance Contributions holiday to existing businesses if small firms are to take on new staff and so help tackle high unemployment.”

Mr Walker went on to point up the need for action in other areas such as business funding and payment times.

He said: “Throughout the recession, we all heard the struggles small firms faced as many had to shut up shop because they were being paid late, and couldn’t access finance from the banks, leaving their cash-flow in a volatile position. While our members have told us the situation has improved slightly, these same issues are now preventing small firms from taking on staff – crucial if the country’s small firms are going to help to secure and promote recovery. 

“It is not only imperative that the Government creates an environment for job creation, but that the banks lend to small firms and businesses are paid on time, to give small firms the confidence they need to grow their business and employ.”