20.08.12

Government Considers Tax-Free 'Mini-Jobs' in an Effort to Boost Employment

Treasury ministers are considering the introduction of German style ‘mini-jobs’ as one of a range of labour reforms to boost employment.

The German model is based on a flexible contract scheme which exempts employees from paying tax and national insurance whilst earning up to €400 (£314) a month. In turn, employers are required to pay only a flat rate of wage taxes, insurance and pension contributions, which simplifies administration.

The initiative which was introduced nearly a decade ago has been hailed by some as the secret to Germany’s “jobs miracle”, and is credited with helping increase employment by 1 million in its first four years.

Although Germany has benefited from one of the lowest rates of unemployment in Europe at a time when much of the continent is struggling with the effects of the recession, critics say that mini-jobs tie workers to low-paid work (German has no minimum wage) with little chance for progression. There are also some suggestions that full-time jobs are being split into mini-jobs to alleviate the tax burden.

Several Conservative MPs have advocated the introduction of such a scheme, however in a statement, the Department for Business, Innovation and Skills said:

“This proposal is a German solution designed to deal with particular issues in the German labour market, driven by their relatively high taxes on labour. This is quite different to the situation in the UK.

“The Government is already taking action to take more people out of income tax and we are carrying out a root-and-branch reform of labour laws to make business more effective while maintain protections for employers.”

Currently, UK workers can earn £8,105 a year before they start paying tax – equivalent to £674 a month.

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