The hidden costs of making your first hire

Aug 28, 2018 by

It can be one of those steps that supercharges your business, and for this reason alone your first hire certainly makes for a very exciting time.

Unfortunately, there are a lot of misconceptions about employment. Employment law is tricky to say the least and if you don’t have any practical experience of it, you will probably misunderstand it at some point.

One of the biggest misunderstandings surrounds the amount your employees are actually costing you. You might have advertised and offered your role at £30,000 per annum, but in reality, its anything but. This might be the amount that your employee sees on his or her pay slip, but in terms of the amount that is heading out of your bank account this is a figure which is seriously deflated.

All of the above is one of the reasons why a lot of companies are offering temporary work in London. This doesn’t have the strings attached, so to speak, and the costs are much lower than you might expect.

Nevertheless, if we return to the permanent employment conundrum, let’s now take a look at some of the “extra” costs that you have to look out for.

The cost of recruitment

Firstly, let’s talk about the costs of recruiting. Unless you are lucky and stumble into your candidate, there is every chance that you are going to have to pay an external source to help you along your way. This source might come in the form of a recruitment agency, or even advertising the role yourself. In the case of the former, this has been known to cost as much as 20% of the applicant’s salary – so it’s certainly not a cheap exercise and one that can set you back thousands when you make that elusive job offer.

Employer National Insurance contributions

If you have ever worked on the “other side”, so to speak, you’ll know all about National Insurance contributions. However, the contributions don’t just come from the employee, and the employer also has to make them. To give an idea on how much these can cost, as soon as the employee starts earning over £702 a week the employer will pay 13.8% of this figure. Suffice to say, particularly if you employ high earning specialists, this can add a lot to your expenses.

Pension costs

This is something that the government have really started to get firm on over recent times, and their auto-enrolment scheme has certainly accelerated this. In short, every employer now has to make a payment of 1% of the person’s salary into their pension pot. This figure is only on the rise as well; for example, in April 2019 it will be 3%.

HR costs

Granted, this next expense is probably only going to apply to medium or larger businesses, but it does exist. A HR department is solely responsible for looking after your employees and as such, these costs are related to the cost of keeping your employees.

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