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 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. Please feel free to call us with any questions.
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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