An employment allowance is a payment made by an employer to an employee as part of their salary or wages

. It is typically paid in addition to the employee's base pay and may be given for various reasons, such as compensating for expenses related to the employee's job or providing additional income

. The UK government's Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £5,000

. This means that employers can pay less employers' Class 1 National Insurance each time they run their payroll until the £5,000 limit is reached

. The allowance is designed to support smaller employers with their employment costs

. To be eligible, businesses must be a business or charity, and cannot be a public body or business doing more than half their work in the public sector

. Certain employees, such as those whose earnings are within IR35 'off-payroll working rules', cannot be included in the claim

. Claiming Employment Allowance is not an automatic process, and employers must tell HMRC that they qualify and want to claim