Costs To Employee Someone

A Breakdown On The Costs To Employee Someone in the UK

General considerations for hiring in the UK

What is the actual cost of hiring an employee at your company? There are many costs of hiring an employee that we need to keep in mind, including:

• Pension
• Social insurance
• Overhead costs
• Recruitment costs
• Insurance
• Holiday and sick pay
• Maternity or paternity leave
• Performance bonuses

We then look at the general costs of working in the UK, as well as national insurance and pension contributions.

We then look at the average salary, minimum wage and real living wage in the UK.

Cost of employment in the UK

When it comes to the cost of employment in the UK, there are five main elements you need to consider:

1.National insurance contributions

The first cost you need to consider is social security contributions. You must do this for each individual worker. The contributions per employee depend on the level of income and age.

For workers over 21 who earn more than £175 a week, you must pay 13.8% of their earnings into National Insurance.

The calculation is different if you hire an apprentice under the age of 25. In addition to regular contributions, you will also have to pay National Insurance for any cash bonus you give to your employees.

2.Pension contributions

Once you have paid social security contributions, it is time to make contributions to the employee’s occupational pension. Pension contributions are required by law and all employees who have joined the company must be included in the pension system within three months of being hired.

Employees can decide not to participate in the pension insurance. The minimum contribution to the pension fund is 8%, with the employer having to contribute at least 3% and the employee the rest.

3.Cost of services

As an employer, you are responsible for providing workplace benefits to your employees. These benefits can vary from job to job, and as an employer you must factor them in as part of the cost of hiring an employee.

Your reward and recognition program should also provide benefits to your employees, and you need to budget appropriately for this.

From rewards like “Employee of the Month” to office bingo, you’ll have to cover the cost of all of these benefits yourself. In addition, subsidies for means of transport (such as company cars, bicycles or scooters) also incur costs.

4.Overhead costs

When you hire a new person, you need to consider all the overhead costs involved. Overhead costs include all of the equipment required for a new employee to successfully complete their job.

In addition, you must provide the new employee with a safe and comfortable workplace, which means additional office space, higher utility costs, etc.

5.Working hours/productivity costs

Last but not least, there are productivity costs. Even if your employees work from 9 a.m. to 5 p.m., they may not be able to focus on their core tasks the entire time.

Productivity improvements should be an urgent issue for almost every workplace in the world. Employee productivity is incredibly important and a crucial factor for success.

Consider the type of “productivity costs” your business is currently struggling with – are there any cumbersome processes that are wasting time?

Salaries and average salaries in the UK

Let’s take an average 35-hour week in which a person works from 9 a.m. to 5 p.m.

The National Living Wage (NLW), the minimum hourly wage that every worker over the age of 25 must receive, states that the worker must be paid at least £9.50 per hour.

This means that under the NLW the employee should earn at least £17,290 per year.

In addition to the National Living Wage, there is the “Real” Living Wage, which states that the person should be paid at least £9.90 per hour, and in London £11.05 per hour, to help people make ends meet.

According to the “real” living wage, the worker should earn at least £18,018, or £20,111 in London, to actually make ends meet.

Annual Cost of Employment: Example

If you’re looking to hire someone in the UK, a good rule of thumb is to take the salary and add around 75-100% more to come up with the total cost of employing that person.

However, this is just an estimate. Sometimes this number is even higher, as the following table shows:

Cost	Annual costs
Salary	£20,000
Office rent per desk	£10,500
Hiring costs	£2,000
Social insurance	£2,600
Business energy bill (for an office with five employees)	£3,000
Training	£1,500
Pension contributions	£600
Company social event per capita	£150
Employers liability insurance (lowest estimate)	£70
Total	£40,420

In short, it’s better to know all the costs upfront than to be surprised when the bills arrive and start adding up.

Additional employee entitlements

Employees also have additional entitlements at their workplace that you as the employer must cover. This includes:

• Holiday pay
• Statutory sick pay (SSP)
• Maternity or childcare leave
• Performance bonuses

All of these and many other additional entitlements must be factored into the cost of employing an employee.

Frequently asked questions about the costs of employment

Below are the most frequently asked questions about the cost of employing workers in the UK…

How much does it cost to employ one person?

As a rule of thumb, they are an additional 75-100% of an employee’s total salary.

How much do pension contributions cost?

Pension contributions amount to at least 8% of annual income, of which the employer contributes 3%.

Reach your highest productivity in record time

The cost of employing an employee goes down when you maximize their productivity. This means you need to have all your HR processes in order – from hiring to requesting leave to executing performance cycles.