What Hidden Costs?
Taking on new staff involves quite a few hidden costs, of which you should be aware.
According to The Sunday Times, the gross salary is the main cost the company will incur and this will be stated as an expense each time you run a payroll, which is usually once a month. From the gross salary, your new employee will have to pay tax and national insurance. It is the employer’s responsibility to deduct the correct amounts and hand them over to HM Revenue & Customs each month.
On top of the gross salary, your company must also pay employer’s national insurance at a rate of 13.8% of the gross salary. An annual employment allowance was introduced by the government in April, so the first £2,000 of employer’s national insurance is waived.
You must also enrol employees into a pension scheme, unless you are planning to operate a company scheme. The minimum level of contributions for an employer will be 3% of the gross salary, which is an additional cost. The compulsory starting date for your company will depend on when you register to operate a PAYE scheme. Assuming it is now, this will be from 1st August 2017, although you could decide to bring it earlier.
Once you start employing staff, it is a legal requirement to have employer’s liability insurance. This will help to protect your company. If you don’t have it, you could face heavy fines. The cost of administering the payroll also needs to be factored in. Unless you are operating one in-house, you will need to enlist a payroll bureau to run it, produce payslips and make Real Time Information submissions to HM Revenue & Customs.
What To Do?
Really, just make sure that you bear all this in mind before hiring. This is all stuff that a company should know. But it’s worth thinking about before you make the commitment of looking for a new team member.