Real cost of employee - an average % ?

[Sunny Days]

Hi

Is there an average % cost to the employer over an hourly wage I can use which would include holiday (statutory), tax, pension contributions, etc.? Trying to find the true cost of employing someone.

Many thanks in advance
H

 

[Newchodge]

As a rule of thumb, at least 25%. If you are not entitled to the NI Employer's Allowance, then nearer 35%, but there are huge variables, depending on the level of pay. If it is under £116 per week, it is cheaper.

 

[Sunny Days]

Thanks Cyndy, I had it in my head somewhere it was 25% ish.

Did you get my email?

H

 

[Bob Morgan]

Some Professions use 'Multipliers' of Gross Salary to achieve Book-Back and Charge-Out Rates - However, this should only be used to achieve Ball Park figures. The Multiplier will take account of Salary (Including Annual Leave, Incapacity Leave etc.), Overheads and Profit. When 'Bidding' only the Salary and Overhead elements will be reflected - Profit and other factors being applied separately, being dependent upon Client, Project, Location, Status and Programme, etc.

Architects and Engineers will be working with Multipliers of 1.8x to 2.6x of Gross Salary. Solicitors, and some Accountants are as high as 3x or more. Usually, 'Productive Hours' will be 1,500 PA - Although this will vary person-to-person, and by Position.

Principals/Directors/Partners, etc., might only be 30% 'Productive,' while other less senior staff will be pegged at 85% to 90% This 'Shortfall' has to be distributed across all staff as part of the Hourly Rate Build-Up.

EXAMPLE:
An Intermediate Engineer paid £45,000 PA (Gross) could have a Multiplier of 2.6 and Annual Attendance Hours of 1,500 - QED 45000*2.6/1500 will give a Charge-Out Rate of £72 Per Hour.

Now, compare that to the Hourly Rate for a 'Grease Monkey' at BMW/Mercedes/Volvo of £215 Per Hour, to change your oil!

Drop me a PM for how this is calculated for each member of staff in greater detail, and how Gross Overheads are spread over all staff.

 

[Mark T Jones]

Historically and fairly unscientificly I always assumed the real cost of an employee was 1.5 x salary

This covered NI, pension, training, office space, holiday/sick cover etc

Possibly a bit OTT, but more realistic than most estimates I see!

 

[mattk]

I agree with Mark. I have always assumed a minimium of 50%, more depending on the package offered.

 

[Mr D]

Historically and fairly unscientificly I always assumed the real cost of an employee was 1.5 x salary

This covered NI, pension, training, office space, holiday/sick cover etc

Possibly a bit OTT, but more realistic than most estimates I see!

I always had to factor just actual costs of employee, business already paying for space regardless of employment.

 

[The Byre]

I agree with Mark. I have always assumed a minimium of 50%, more depending on the package offered.

In Germany, we calculate that it costs roughly 50,000€ to put just 20,000 p.a. into an employee's trouser pocket - so you get off lightly in the UK!

 

[mattk]

In Germany, we calculate that it costs roughly 50,000€ to put just 20,000 p.a. into an employee's trouser pocket - so you get off lightly in the UK!

Wow.

What kind of costs is that made up of?

 

[The Byre]

Tax on employee's wage; multiple payroll taxes, pension plans, mandatory medical insurance, NI, mandatory care insurance, religion tax (if applicable) mandatory savings schemes, 13th month's wages at Christmas, holiday bonus and probably other stuff I've forgotten!

Add to that c.a. 30% corp.tax and the need to set aside funds in case of illness or other mishaps, plus the legal requirements for parking, staff canteen and about one thousand other things and you begin to see why German companies have to be far more productive.

 

[Newchodge]

Tax on employee's wage; multiple payroll taxes, pension plans, mandatory medical insurance, NI, mandatory care insurance, religion tax (if applicable) mandatory savings schemes, 13th month's wages at Christmas, holiday bonus and probably other stuff I've forgotten!

Add to that c.a. 30% corp.tax and the need to set aside funds in case of illness or other mishaps, plus the legal requirements for parking, staff canteen and about one thousand other things and you begin to see why German companies have to be far more productive.

Tell that to the UK businesses who claim the uK has the most restrictive employment law in the world!

 

[Mr D]

Tell that to the UK businesses who claim the uK has the most restrictive employment law in the world!

Do we believe those companies?

 

[The Byre]

Tell that to the UK businesses who claim the uK has the most restrictive employment law in the world!

The one thing that strikes one about the UK when in business, is that (unlike any other country I have ever had to deal with) is that just about every tax or other 'compulsorily' contribution to the state's coffers, seems to be on a voluntary (you may opt-out if you wish) basis.

From inheritance tax to stamp duty, from VAT to corporation tax, from PAYE to NI, there are special schemes for the wealthy and those without scruples to avoid paying anything, whilst maintaining all the usual benefits that spring from others paying. You can even get a state pension and in full, without ever having paid NI.

As George Carlin said "It's a big party - and you're not invited!"

 

[Mr D]

The one thing that strikes one about the UK when in business, is that (unlike any other country I have ever had to deal with) is that just about every tax or other 'compulsorily' contribution to the state's coffers, seems to be on a voluntary (you may opt-out if you wish) basis.

From inheritance tax to stamp duty, from VAT to corporation tax, from PAYE to NI, there are special schemes for the wealthy and those without scruples to avoid paying anything, whilst maintaining all the usual benefits that spring from others paying. You can even get a state pension and in full, without ever having paid NI.

As George Carlin said "It's a big party - and you're not invited!"

I avoid inheritance tax, I'll never pay it. What with being dead. If my estate is small enough then even the estate won't be paying any.
The avoiding of corporation tax, besides the obvious one of avoiding taxable profit what are the other methods?

 

[The Byre]

The avoiding of corporation tax, besides the obvious one of avoiding taxable profit what are the other methods?

When avoiding taxes of ANY sort, your most useful weapon is to be international. States are national by definition. Their jurisdiction ends at the boarder - and it must be pointed out, if you don't like paying your fair share of taxes and you happen to be wealthy, Brexit is like manna from the heavens!

The EU has been insisting on closing the various tax loopholes and information blockages that hitherto allowed companies and individuals to give taxes the old body-swerve. A 'No-Deal' Brexit will make that all-important Luxembourg holding company a real 'must-have'!

Amazon and others don't pay CT by charging the UK company a license fee for the use of the name, software and other IP. That fee matches any profit more or less one-to-one and is payable to their Luxembourg holding.

Another method is the infamous Dutch-Irish 'sandwich'. The EU has been moving against this implement, but Brexit will open it wide for UK companies.

All this talk of a 'No-Deal' Brexit has lead to the great sucking sound of money, as it moves from the UK to Luxembourg, Ireland and Switzerland, where it is turned into Euros and Dollars, safe from the ravages of the rudderless UK economy.

 

[Mr D]

When avoiding taxes of ANY sort, your most useful weapon is to be international. States are national by definition. Their jurisdiction ends at the boarder - and it must be pointed out, if you don't like paying your fair share of taxes and you happen to be wealthy, Brexit is like manna from the heavens!

The EU has been insisting on closing the various tax loopholes and information blockages that hitherto allowed companies and individuals to give taxes the old body-swerve. A 'No-Deal' Brexit will make that all-important Luxembourg holding company a real 'must-have'!

Amazon and others don't pay CT by charging the UK company a license fee for the use of the name, software and other IP. That fee matches any profit more or less one-to-one and is payable to their Luxembourg holding.

Another method is the infamous Dutch-Irish 'sandwich'. The EU has been moving against this implement, but Brexit will open it wide for UK companies.

All this talk of a 'No-Deal' Brexit has lead to the great sucking sound of money, as it moves from the UK to Luxembourg, Ireland and Switzerland, where it is turned into Euros and Dollars, safe from the ravages of the rudderless UK economy.

Yes as I said avoiding taxable profit. If taxes aren't payable then you don't pay them.

Looked at a botte of wine while out shopping earlier, if I had purchased it then I would avoid paying corporation tax on the purchase.

The charging of a license fee - this is normal business practice around the world? Anyone here pay for or charge licence fees and think the practice should be banned?
Just thinking of some of my designs, if they were ever to be put for license I'm pretty sure I'd want something for the use of the design on an ongoing basis.

 

[The Byre]

I don't think you quite 'get-it'! You pay yourself the license fee for IP. UK base rate 19% on profits. Luxembourg rate for IP incomes is c.a. 5.7%. Call your profit a license fee to be paid to your own Luxembourg holding company and your tax on profit falls from 19% to 5.7%.

Simples!

The charging of a license fee - this is normal business practice around the world?

Oh yes!

And that is on profits from IP fees, so the Luxembourg holding can reduce that yet again by racking up charges elsewhere - though the level to which that is possible is very much a matter for negotiation with the Luxembourg tax authorities!

 

[Mr D]

I don't think you quite 'get-it'! You pay yourself the license fee for IP. UK base rate 19% on profits. Luxembourg rate for IP incomes is c.a. 5.7%. Call your profit a license fee to be paid to your own Luxembourg holding company and your tax on profit falls from 19% to 5.7%.

Simples!



Oh yes!

So the companies pay the tax as required. And other companies pay the license fee at the same rate as anyone else would (arms length pricing?)