Whether you are employing someone for the first time or you have had domestic staff in the past, it is essential that you know from the outset what the costs of employing someone are going to be.
One of the most important things you can do to protect your costs is to agree a gross salary with your employee.
Gross Versus Net
A gross salary is inclusive of tax, employee's national insurance and any other monies payable on behalf of your employee, such as employee's pension contributions, student loans and tax on benefits in kind. The only expense it does not incorporate is Employer's National Insurance.
Employers who agree a net salary commit to paying all of these additional expenses on top of their employee's take-home pay and you may not always know what these will be, plus they can change in the future – if, for example, your employee has an undisclosed student loan or decides to pay more into their pension.
Other Employment Costs
As well as your gross salary and Employer's National Insurance, you will need to think about the following:
- Employers Liability Insurance – this is a legal requirement.
- Employer's pension contributions – under recent government legislation most employers will be required to pay into a workplace pension for their employees (see Pensions for further information)
- If you are employing a payroll company such as Stafftax you will need to account for our annual subscription fee.
- If you are not subscribing to Stafftax you will need to get a Contract of Employment drawn up by a solicitor.
- If your employee is off sick or goes on maternity leave will you need to have a replacement?
Once you understand your costs, user our Employer Checklist to make sure you understand all the obligatory steps to taking on a new employee. Please feel free to call us with any questions.