Whether you are employing someone for the first time or have employed domestic staff before, it’s essential to understand the full costs of employment from the outset.
One of the most effective ways to manage and protect your costs is to agree a gross salary with your employee, helping you budget accurately and avoid unexpected expenses.
Gross Salaries
Take Home Pay + Employee’s National Insurance + Tax (+ Employee’s Pension Contributions if applicable)
Net Salaries
Take Home Pay that the employee receives after Tax, National Insurance deductions (and Pension deductions if applicable).
A gross salary allows the employer to control their costs. It incorporates tax no matter how much this might be. If an employer commits to a net salary they are writing a blank cheque for tax and if their employee has unpaid tax from the past, or a student loan, or for any number of reasons has a non-standard tax code, then hiring that person could end up much more expensive than anticipated.
If an employer commits to a net salary they are writing a blank cheque for tax and if their employee has unpaid tax from the past, or a student loan, or for any number of reasons has a non-standard tax code, then hiring that person could end up much more expensive than anticipated.
Unfortunately the Gross salary doesn’t account for all your costs when employing a domestic staff member. What does is something called the Total Cost of Employment.
Total Cost of Employment = Gross Salary + Employer’s National Insurance Contributions (+ Employer’s Pension Contributions if applicable).
In other words, a Gross salary accounts for the Employee’s NI and Pension Contributions but not the Employer’s.
As well as your gross salary and Employer’s National Insurance, you will need to think about the following:
Once you understand your costs, use our Employer Checklist to make sure you understand all the obligatory steps to taking on a new employee. Stafftax has been trusted by over 3000 employers of domestic staff over the last 20 years, so please feel free to call us with any questions.
Why is it important to agree on a gross salary for my employee?
It is important to agree on a gross salary because this allows you to control and protect your costs as an employer. If you agree to a net salary, you may become responsible for covering any unpaid tax or student loan deductions owed by the employee. As a result, employing them could end up costing more than you originally anticipated.
Is a gross salary the total amount that I need to budget for?
No, the Gross salary does not represent your total amount you need to budget for as an employer. The total cost of employment includes the gross salary, plus employer costs such as National Insurance and pension contributions.
Are there any other costs that I need to consider as an employer?
Yes. In addition to the total cost of employment, you should also consider other potential costs, such as Employers Liability Insurance, and the cost of using a payroll provider, such as Stafftax. You may also need to budget for absences, such as if your employee is off sick or on maternity leave, you may need to hire a temporary replacement.
Our Domestic Payroll Service makes managing salaries easy. It ensures you have the right paperwork to fulfill your legal obligations as an employer.
Domestic staff are fundamental to the smooth running of private households, family offices, holiday properties and yachts all across the world.
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