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Government considers tax-free 'mini jobs'

London, UK (20/08/2012)

LONDON (Management Today) Tory MPs are championing a system that will allow people to take certain jobs without paying national insurance or tax on their earnings.

Despite all the turbulence in the eurozone, Germany’s economy continues to trundle along quite comfortably. It’s not surprising therefore that the UK government is trying to crib some of their ideas to speed things up over here. According to the Guardian, the latest idea is to copy the German ‘mini-jobs’ system that allows people to earn a certain amount in part time jobs without paying any tax. The German system caps tax-free earnings at €400 limit per month, and is hailed by some economists as the key to the country’s ‘jobs miracle’. And since their economy is still growing, the UK would do well to take a leaf out of their book.
 
In the UK, this scheme is still under discussion/rumour at the moment. Critics argue that tax revenues could be undermined as people create several mini-jobs out of existing full-time posts. Others worry that the scheme would entrench low pay for a large section of the workforce: this has already happened to a certain extent in Germany, where they do not have any minimum wage legislation.
 
So, how likely is it that this will be introduced in the UK? At the moment, George Osborne has not said yay or nay to the idea (at least not publicly), but it could certainly be a boon to employers. If the German system were copied exactly, employers would only pay a flat rate to cover pensions, wage taxes and social insurance – so the administrative burden of taking these part-timers on would be much less. The scheme would also make it easier for employers with very little cash floating around to get some more people on board. On the other hand, the prospect of 'mini-jobs' migrating people into 'maxi' full-time jobs seems modest.
 
Germany is not a bad place to look for economic inspiration, but this idea seems pretty half-baked to us. The UK labour market is already much more flexible than in Germany, where the mini-jobs exist largely as a politically expedient way of sidestepping burdensome employment legislation.

Reform of the whole UK system might be a more effective approach, but that is much harder to do than a quick 'initiative', isn't it!


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