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The special exemption from NIC on certain holiday pay (mainly in the
construction industry, but also used elsewhere) is to be abolished. It will
be removed on 30 October 2007 for employers outside of the construction
industry and there will be a five year transitional period for the
construction industry, ending on 30 October 2012, when the exemption will be
withdrawn completely.
The Chancellor has chosen not to limit the exemption indefinitely to the
construction industry as the construction industry is no longer the only
industry to employ people on a short-term basis and the Working Time
Regulations ensure that holiday entitlement is preserved even for short time
periods.
The exemption will be fully available until 30 October 2012 where the
employer is carrying on a business which includes construction operations
and the employee is personally engaged in construction operations at the
time the entitlement to the holiday pay is earned. This therefore excludes
employees of construction companies who are not directly involved in
construction work from benefiting from the exemption during the five year
transitional period.
Our view
The exemption for NIC on holiday pay is an anomaly arising from
historical industry– specific factors. The transitional period seems
designed to allow construction industry employers to take advantage of
the NIC exemption until the end of construction for the 2012 Olympic
Games. |
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