If you run a business and need more manpower but want to keep your wage bill down, opting for two part-timers, rather than one full-time employee, might be a good idea, says Tax Tips & Advice. Why? Because “each employee is entitled to an earnings threshold of £5,720 on which neither they, nor you as their employer, is liable to pay national insurance (NI)”.
Imagine you take on two employees and pay them £7,000 a year each. Because their earnings threshold is £5,720, NI is only due on £1,280 of each employee’s wage, which works out at a total of £328. Employ one person on a salary of £14,000, however, and NI is due on £8,250 of their wage, which amounts to £1,060 (£732 more).
Since part-timers are often parents with young children, there is another opportunity to cut your bill. “By replacing some of their wages with an equivalent amount of tax and NI-free childcare vouchers, to a maximum of £55 per week, you could save a further £366 per year in NI” per employee (£55 x 52 weeks x 12.8% NI).