Employment costs up, up and away

For all employers, whether 1 employee or 50,000, the cost of employing someone is set to become a whole lot more expensive AND administratively burdensome, following the governments approval yesterday of the new 'National Employment Savings Trust' (NEST).

What's NEST? Simply put - compulsory pension saving for all employees.

Cutting to the chase, what are the hard facts?

• Employees earning over the personal allowance of £7475 automatically enrolled
• Commences next October 2012 (large employers)
• All employers in by October 2016
• Compulsory contributions starting at 2% (1% employer, 1% employee) from 2012
• By 2017, split will be 5% employee and 3% employer minimum contribution.

Pension experts say that lifelong contributions to the scheme will produce only a modest pension, but I guess thats better than nothing for employees.

My concern is for employers - an effective rise of 3% on the cost of employing someone is huge. Will the Office for Tax Simplification be recommendiing a reuction in other headline tax rates to compensate? I doubt it. And not to mention the massive headache all the paperwork will no doubt bring.