Treasury Exchequer Secretary David Gauke has outlined measures to "reverse the impact" of a one-percentage-point rise in National Insurance (NI) rates first put forward by Labour.
He also described plans to exempt some new businesses from NI.
During second reading debate of the National Insurance Contributions Bill on 23 November 2010, Mr Gauke told MPs the measures would benefit the poorest in society.
Mr Gauke said the NI rise would still go ahead but businesses would be protected as the employer NI contribution threshold will increase by £21 a week - to offset what the Tories called Labour's "jobs tax" at the general election.
There will also be a three-year NI holiday for new businesses in regions where the private sector is relatively weak, he explained.
Start-ups in Scotland, Northern Ireland, Wales, north-east and north-west England, the midlands and south-west England would all benefit with the exemption on NI contributions for their first 10 employees.
So far, 1,000 businesses had applied for the NI exemption but thousands more were expected, Mr Gauke said.
Shadow treasury minister David Hanson said: "We welcome the National Insurance rise because we would have done it."
But he called for the NI holiday to be extended to London and the south-east England.
"We welcome the holiday provisions as far as they go but we think they need to be reflected upon and in committee we will take every opportunity to try to persuade the minister to look at imaginative schemes which may use the same amount of money in different ways or which may look at extending the holiday," he told MPs.
At the conclusion of the debate, MPs agreed to give the bill a second reading without a vote.