small business employ someone

[tapmadi]

we are a small business we are about to employ someone for the first time offering a basic of 14k, ive found out that i have to pay 12.8% NI employer contribution for NI - thats a lot of money - what ways can i employ someone so i dont have to pay that?

contract basis? , temp basis? self employed basis? any ideas?

[dzug]

You'll probably find that someone you are not paying NI for will want rather more than �14K to cover the risks and responsibilities that an employer normally takes on.

[buildersmate]

That's the rules of the tax game - you employ people, you pay Employer's NI. Sorry. Even as a Temp employee you'd pay the NI. The IR will catch up with you treat this employee as self-employed and pay him/her gross. You would be liable for back-assessment of NI and the employee's tax that you should have deducted under PAYE. Look at the rules that govern IR35, an Inland Revenue document.

[tapmadi]

oh ok looks like theres no way out - i was thinking that treat him as a contracter and pay him X amount for his services a month he is responsible for his taxes etc - he isnt an employee -

[stanleyman]

If a contractor works for only one person the tax man now considers they are employed and deals accordingly. They would need to also work for someone else to be self employed.

[buildersmate]

Correct. The only other way around it is for the 'employee' to set up as a limited company. You pay the limited company gross with no deductions, the limited company pays the 'director' - the chap who works for you. But then his limited company has to pay employers NI on the directors earnings, as well as the director paying employee's NI. It only becomes worthwhile as a tax dodge, not as an NI dodge, when the employee can avoid paying part of his tax at the higher rate.

[jason1980]

and setting up as a limited company brings the legal requirement to file accounts, register with companies house and a limited company consists of more than one person.

The employers ni for small businesses can be paid every three months. So it would be 12.8% of the salary divided into four equal parts, paid the same time as the tax and employee NI that you would have deducted. Its a small price to pay if you need to employ someone. Otherwise advertise the job at 12K ? perhaps giving you already a 2K advance if you have 14K to budget.