IT’S clear that Northern Ireland’s middle-income earners will be hit hardest by the upcoming rise of 1.25 per cent to national insurance. More business owners in Northern Ireland fall into this £30,000 to £50,000 bracket than in any other region in the UK, and in my opinion, this presents a significant challenge.
Already dealing with the economic insecurity created by Brexit, the pandemic and soaring inflation, April’s increase will force businesses to examine how they can cut back to sustain revenue and profits. Given the current climate, taking a lower salary as an employer, or indeed, increasing prices for customers, may not be the most sensible solution for small businesses in the long term.
I’ve been advising owner managed businesses in Northern Ireland since 1999, so I know just how resilient they are. These business owners have often undertaken a wide range of roles in challenging conditions and have had to make difficult decisions. Whilst the circumstances may be different – it is their ability to remain agile that will stand them in good stead.
These businesses must accommodate the national insurance increase and, providing they act sooner rather than later, they can mitigate its impact. In the immediate future, owners can examine cash flow forecasts to chart how the increase is going to affect their expenses, and by identifying the break-even points, businesses can understand if they need to make necessary cuts and have the bandwidth to invest where required.
As April approaches, monitoring staffing costs will be the number one priority for many businesses. Numerous organisations are considering lowering salary costs and, therefore, national insurance contributions, by offering employees non-financial benefits instead. These could include health insurance and perk plans that reward and remunerate in alternative ways.
Salary sacrifice schemes, such as childcare, cycle to work schemes, ultra-low emission company cars, gym memberships, training courses and additional annual leave, shouldn’t be overlooked as alternative benefits either. The appetite for flexible working arrangements and employee requests for reduced hours are options employers can explore as the labour force continues to prioritise work-life balance.
When introduced for HMRC approved reasons these schemes are free from tax and national insurance contribution for employers. Instead, they can pay the difference directly into their employee’s pension.
At RB+ we understand that a challenging economic climate, like the one that we’re currently experiencing, can put businesses under pressure, forcing them to make tough choices. However, solutions exist, and the situation can be successfully navigated by seeking the right expert support as soon as possible.
Having access to trusted advice is crucial – according to a recent survey by Sage, 91 per cent of owner managed businesses rate their accountants as an ‘important part of their business operation’ and 49 per cent utilise their accountants for strategic business guidance.
:: Ross Boyd (info@rossboyd.co.uk) is founder and director of RB+ (http://www.rossboyd.co.uk)
