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|An example: a net wage agreement can be costly|
Domestic employment is one of the last professions left in the UK where wages are still commonly agreed on the basis of net (i.e. take-home) pay. It is surprising that net pay arrangements are still so common, especially when you bear in mind the financial implications at stake, both for the employer and the employee.
The difference between a net and a gross wage can be as much as 50%.Stafftax has been advising parents for many years to always discuss and agree salaries in gross terms for many years, yet we frequently receive calls from potential employers who are unaware of the real cost involved with domestic employment. Once they find out that the difference can be as much as 50% many realise they can't afford to employ them at all, or they decide to only declare part of the salary in an attempt to save money, which not only is illegal but also has real-life implications for the employee.
By agreeing a net wage with your employee you are effectively agreeing to pay all their taxes, whatever these may be. In other words a domestic employee on a net wage agreement will always take home the same amount no matter what their particular tax code is or whether they have unpaid tax from a previous place of work. This may be good for them; however, for you it could prove to be a costly decision.
Consider the following:
If the employee is not on a standard tax code or there is unpaid or underpaid tax from previous employment, it could become even more expensive. To read more about the pitfalls of agreeing a net wage from an employer's point of view, please click here.
*tax year 2008/2009
As an employer you have a legal duty to take out employer's liability insurance, but you should also consider motor insurance and nanny public liability insurance.
|A step-by-step guide to make sure your employee can work in the UK|
When you consider employing someone you must carry out basic document checks to ensure the person is entitled to work in the UK. Nannytax has put together a guide to help you with this process.