Costs You Should Consider Before Becoming an Employer
For a growing company it is a big and exciting step to hire the first employee. Whether you are employing someone for the first time or have had staff in the past, there are hidden employment costs. Let a Glasgow accountant guide you to business success!
Be ready to pay more than what you budgeted for! Employment costs go further than the planned £7.80 per hour you pay your employee. Factoring in the amount, the holiday allowance, sick leave, essential training or any other ineffective time, the original wage budget is certainly going to be increasing. For a smaller company with only a couple of employees, something like this would be essential to plan for!
Other factors that could affect the decision to employ.
National Insurance Contributions
The agreed salary for a new employee is for example £15,000 per year, you have to then acknowledge the employer national insurance rates. Employers must pay national insurance contributions on their employee’s earnings and benefits. The amount paid depends on the employee’s National Insurance category letter.
Employers Liability Insurance
By law, you must get employer’s liability insurance! As soon as you become an employer, the policy you hold must cover you for at least £5 million. What is the purpose? Having EL insurance is essential, helping to pay compensation if one of your employees is injured or becomes ill as a result of working for your business. Also! There is a risk of being fined if you do not display the EL certificate.
Employer’s Pension Contributions
Another factor to consider when deciding to hire employees is pension contributions! Under recent legislation most employers will be required to pay into a workplace pension for their employees. The amount the employee and you pay is depending on what type of pension scheme the employee is on, whether the employee has been enrolled in a pension automatically or the employee has joined one voluntarily.
These further employment costs contribute greatly on the decision to hire another or your first employee.
A Glasgow accountant from The Kelvin Partnership can help you to decide the next best steps, organise finances and identify any areas to rethink before making such an important step in the growth of your business.
If you are thinking about employing someone and need advice, don’t hesitate to get in touch.
Thanks to pixabay.com for the images.