SMEs may have enjoyed ‘tentative’ growth lately, at least according to the Federation of Small Business’s ‘Voice of Small Business’ survey, but when asked why they’re not hiring they hit back with a range of excuses: 37% said it was down to a lack of work and uncertainty of contracts, 33% blamed the state of the economy, 31% pointed to cash flow, and 16% blamed the cost of credit. Meanwhile 23% said that payroll taxes were a barrier to taking on staff.
Which is not a great picture for a Government facing unemployment figures of 2.46m. ‘Small businesses want to employ,’ says FSB chairman John Walker - who reckons the answer is to provide employers with the incentives to overcome such hurdles. Chief among the FSB’s proposed solutions is to introduce a holiday from National Insurance contributions, reducing NIC payments for the first six months of a new recruit’s employment; 31% of those surveyed said that such a move would encourage them to take on new staff.
This idea is nothing new, of course: the Government actually introduced a temporary NIC holiday scheme for start-ups taking on up to 10 employees in 2010. But the FSB believes that the Government has to go further - and extend the holiday so it applies to any small firm with up to four members of staff who take on up to three new employees.
That’s going to be tricky for the Government to swallow, when its depleted coffers already have it delving down the back of the sofa for small change. But the FSB has done its sums. Based on an average weekly salary of £489, waiving the contributions for three new employees would save a small business £7,567.86. Yet the government would still earn over £5,000 per employee.
What's more, the Treasury thought the previous NI holiday would help 400,000 businesses to employ 800,000 people - but the FSB says fewer than 3,000 firms had taken it up in the period from June to the end of March, and that it has supported only 6,000 new jobs. So this might be one occasion when a Plan B might be a good idea.