Budget plan to scrap NI payments given lukewarm welcome

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The abolition of national insurance payments for employers of apprentices will not save much money, say nursery chains.

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Apprentices at Bertram Nursery Group

Susan McGhee, commercial director of Bertram Nursery Group, which employs about 140 apprentices, said, ‘It probably won’t increase the number of apprentices in nurseries.

‘Every little helps, but it won’t be a massive saving.’

In the Autumn budget statement yesterday, Chancellor George Osborne announced he would extend the NI exemption for employers from apprentices aged under 21 to those aged under 25.

He said, ‘When a business is giving a young person a chance in life we’re going to support them, not tax them.'

The treasury estimates that employers hiring an estimated 500,000 apprentices will benefit from the new rule, which will be brought in in April 2016.

Ms McGhee added, ‘We already have a plan in place about employing apprentices and big employers are generally clued up to the benefits of apprenticeships. That said, there is a massive number of SMEs that could be employing apprentices.

‘Of course it is not scheduled until 2016 so we wait and see whether anything will actually happen.’

Rosalind Taylor, executive director of Puffins of Exeter, an SME which helped devise the new apprenticeship standard, said, 'It will only help apprentices who are over 19 doing an advanced apprenticeship. The rest aren't earning enough for it to make a difference.

'It's a bit of a help I suppose, but quite negligible, and reducing business rates or VAT would have far more impact.'

Employers currently pay national insurance contributions (NICs) for all employees earning above £153 per week.

Under-19s earning the apprentice minimum wage of £2.73 per hour will not qualify for NICs but older apprentices, and 19-year-olds in the second year of an apprenticeship, will.

Nick Botterill, director of Active Learning, which employs one or two apprentices in each of its nine settings and has 340 staff, said, 'You take on apprentices on the basis that you are improving the skill pool, but in our experience about a third of them don’t work out. The biggest problem we have is staff and recruitment and this makes it a little bit more financially palatable [to hire an apprentice].

'It would be better to do something about the amount of tax that people with low salaries pay - notwithstanding the personal allowance changes.’

But a spokesman for AELP, a membership association for vocational employment and learning providers, said the combined effect of the measure, and the fact that businesses with fewer than 50 staff will get a payment incentive as part of the apprenticeship reforms, will reduce the overall cost for many nurseries. 

He added, 'The problem is that the government is at the same time requiring businesses of all sizes to first make a cash contribution towards the cost of training an apprentice before the state releases its own contribution and we are concerned about the cashflow implications ... small businesses may be put off by the complexity and bureaucracy involved.'

The change will cost the Government £105m in 2016/17, £110m in 2017/18 £120m in 2018/19 and £125m in 2019/20.

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