New Enterprise Allowance – What is it?
The New Enterprise Allowance (NEA) is a system created to help those people who have been unemployed for a long time in returning to work by setting up their own business. If you have a reasonable business plan, then you could qualify for a weekly allowance of up to £1,274 for 26 weeks.
How Does the New Enterprise Allowance Works?
Based on the Government’s guidelines, in order to qualify for the New Enterprise Allowance (NEA), you have to be more than 18 years old. Also, you or your partner must be a recipient of either Jobseeker’s Allowance or Employment and Support Allowance. Or if you are a single parent or you are disabled or sick, then you should be receiving income support.
Also, you could qualify if you are getting Universal Credit, additionally, if you are already self-employed. If you are a self-employed Universal Credit claimant, then you could get assistance in developing a business plan, acquire mentoring help for up to 52 weeks, as well as apply for a start-up loan in case your business is less than two years old.
If you are just starting your new business, then a business mentor will be assigned to you. He will walk you through the process and discuss the operations of running a small business. But bear in mind that these are all subject to some changes since the New Enterprise Allowance is going to be replaced with a newer version of the scheme.
What Will The New Version of New Enterprise Allowance Include?
Most likely, the second stage of NEA will include the same components of the original programme and will be fulfilled by private providers. Additionally, there will be a pre-assessment phase known as “Link Up, Start Up” that will be included. Here, applicants will understand more about the implications and responsibilities of being self-employed, as well as the income struggles that they have to confront.
The renewed NEA has a close relationship with Universal Credit. Providers are giving incentives so clients will strive to increase their income to the point that they can reach the level known as the Minimum Income Floor.
The Minimum Income Floor is dependent on the number of hours that you are expected to work every week with a minimum of up to 35 hours. This will then be multiplied by the minimum wage. If your earnings are less than this, then you will be restrained from having the difference made up by a higher Universal Credit payment.
These modifications also indicate that NEA support should be provided to existing self-employed claimants who are on Universal Credit, most especially those who have some difficulties in reaching the MIF.
As a result, the Department for Work and Pensions is now being flooded with requests for help. It is estimated that around 40% of these full-time self-employed individuals are earning less than the Minimum Income Floor.
What Are The Components Of NEA That Requires Some Changes?
The Entrepreneurial Audit is expressing its concern for the NEA claimants which are presently paid £65 a week for the first three months, then after three months, it was reduced to £33 a week. Based on the report, this is known as an “abrupt cliff edge.” Also, it suggested that a better strategy would be to lessen this decrease over a longer period of time. Most businesses would require more than three months so they can get going. If the NEA wants to help more businesses succeed then they should consider amending this.
Another major issue was the NEA payment average for the entire six months which is a quarter less compared to the amount of Job Seeker’s Allowance. Since claimants are not allowed to claim both at once then it seems that there is no justification for this discrepancy. Based on the report, it is recommended that the two payment amounts should be equalized.