Pensions contributions to tax small businesses

The Forum of Private Business (FPB) has branded plans for a compulsory contribution from employers to their employees’ pension schemes as ‘yet another tax on employment’. The proposals were set out by the Secretary of State for Work and Pensions, John Hutton MP, in the White Paper published this week.

The paper on pension reform follows the Turner Report which was published in 2005 and will require firms to make a contribution of 3 % of their employees’ wages to the national occupational pensions savings scheme. The Chief Executive of the FPB, Nick Goulding, believes it is another disincentive to growth of small firms.

"More and more smaller businesses are becoming reluctant to take on new staff because of this Government’s obsession with cashing in every time they do."

The White Paper sets out plans to introduce the compulsory contributions slowly over the next few years. Mr Goulding believes that is a measure designed to placate the business community.

"Staggering the introduction of this scheme over several years is an attempt to blur its impact; business is being asked to foot the bill created by the mismanagement of pensions by the Government and it will ultimately mean the creation of fewer jobs."

Alan Sykes is the Managing Partner of Ablemail Electronics in Stockport, Cheshire. The firm manufactures electronic components for the automotive industry. Mr Sykes says he has had to reduce the number of employees because of legislation that is costing him dearly.

"This is the latest tax on employment from the Government, I can’t see how smaller businesses can grow given that they are made to pay at every opportunity.

"I am down to eight full time employees which is the absolute minimum I need to run my business effectively." he added.

The FPB is asking for reform of current tax burdens on smaller firms to be eased to compensate for the extra expense. Mr Goulding said it must be a give and take situation.

"The Government wants business to pay for pensions but aren’t prepared to ease the burden by, for example, slowing the increase in the National Minimum Wage."

"Assistance in dealing with administration for smaller firms must be made a priority when implementing this scheme." he added.