This is the biggest cost that comes with having employees and of course, the salary you pay each employee depends on their skills, experience and what they’ll be doing for your business.
National Insurance contributions
As well as employee salaries, employers in the UK also pay employee National Insurance (NI) contributions. NI is a tax that is used to fund the National Health Service (NHS), State Pensions, Jobseekers Allowance, Maternity Allowance and a whole host of other benefits.
The level of Class 1 NI contributions paid by the employer depends on the employee’s earnings. The rates for most people for the tax year 2023 to 2024 are 12% for those earning £1,048 to £4,189 a month for example. Employees will pay less if they’re married, a widow, have a valid ‘certificate of election’ or are deferring National Insurance because they’ve got more than one job.
On top of salaries and NI contributions, UK employers may also give employees certain benefits to help attract and retain staff, like health insurance, pension contributions, paid leave, gym memberships and other reward schemes.
Taxes and business costs to an employer
On top of the cost of salaries, National Insurance contributions and employee benefits, employees will also be subject to income tax.
This is a tax paid on the earnings of individual employees. How much income tax they pay depends on the person’s income – the more they earn, the more tax they’ll pay.
If you’re thinking about taking on someone, it’s important to factor in the ‘true’ cost of adding new talent to your team. That way, you can be sure you’re ready for the financial commitment having employees requires and their jobs are as secure and sustainable as possible.
If you employ people then you not only need to know what they’ll cost, but how you pay them. You’ll find plenty of advice on payroll in our articles so take a look around our website or get in touch to find out more.