When you’re growing your business, you might get to a point where you need some help. Perhaps it’s time to look into hiring an employee or even several employees. But can you afford to do so?
Another option might be to outsource some work to freelancers and agencies, so how can you decide which is best? Hiring an employee won’t just cost you their salary. You also need to consider the other financial obligations that you will have and what you’ll need to provide for them. Here’s what you’ll need to keep in mind.
Firstly, unless you already have someone in mind for the position, you’ll need to pay for recruitment. This could mean using a recruitment firm to help you get hiring an employee or using your own time and money to advertise the position and find the right candidate. It’s cheaper by far to advertise the role yourself on job sites or even social media, and could work out if you have a good network.
The cost of your employee’s salary is obviously a major thing to take into account. And the higher their salary is, the more you will pay for other expenses.
To begin with, you’ll need to be familiar with the National Minimum Wage and the National Living Wage. There are three different minimum wage figures depending on age, for those under 18, 18-20 or 21-24. The National Living Wage is for those over the age of 25, and there is also a minimum wage for apprentices. Make sure you check the current requirements. Of course, for many roles, minimum wage won’t be enough to attract the right talent.
Employers must make national insurance contributions, as well as deducting national insurance from their employee’s salary. This is a percentage of the employee’s salary once they earn over a certain amount. For most employers in the 2018/19 tax year, this means they will pay 13.8% of everything over £162 that their employee earns each week. For example, if you have an employee over 25 working 40 hours a week earning the National Living Wage (£313.20 per week), you will pay employer contributions of roughly £20.87 each week.
All employers must now have a pension scheme for their employees. Both employers and employees are required to pay into workplace pensions. Currently, employees need to contribute a minimum of 3% of their salary and employers contribute 2%, which will rise to 5% and 3%, respectively, in April 2019.
Of course, there are other costs associated with hiring an employee too. You need to provide them with somewhere to work and the necessary tools to get their job done. The cost of managing your employees is something to take into account before you decide to hire someone. You also need to consider training and perhaps things like bonuses and benefits too.
Hiring employees costs more than just their salaries, so make sure you’re aware of all the costs before you think about hiring someone.