The real cost of employment
Most companies calculate whether they can afford a new member of staff against what their monthly salary will be, but there’s far more to it than that.
The direct costs will include employers national insurance contributions, pension contributions, holiday pay and sick pay. But what about parental leave and things like bonuses, staff entertainment and other incidental costs, perhaps uniforms, computer equipment and licences or company vehicles for some roles.
The total cost is beginning to escalate.
Indirect costs
These became much more visible for us recently, when a new recruit simply didn’t turn up on their start day.
We’d invested in the acquisition of a laptop and dual monitors for the desk they would have occupied. We also had subscribed to various online services, such as an MS365 licence, cloud data services and the cost of our tech support’s time in setting all this up. Not to mention that every member of staff occupies office space – and that costs money, whether it’s rent (usually assessed by per square foot) or the cost of purchasing premises and the interest on any associated loans.
As a training practice, we had also scheduled training time for both induction and development a bit further down the line.
… and costs are rising
With the new Government, there are plans to change the rules relating to both National Insurance (NI) and the minimum wage.
There is a high likelihood that the current rules that don’t require a firm to pay employers national insurance for employees below the age of 21 will change.
In addition, the age-related minimum wage cut-off points are reported to be under the cosh, with a single minimum wage threshold, regardless of age potentially on the table.
Currently the minimum wage for 16-17 yar olds and apprentices is just £6.40 per hour. This is £8.60 for 18-20 year olds and rises to £11.44 from 21 years of age. That means that a 17 year old’s pay could almost double depending on what Labour do – then the national insurance for their employer will increase considerably.
Bear in mind that many employers looking for basic level support are happy to pay a 16 or 17 year old £6.40 an hour. But, if they have to pay £11.44 an hour, they’re probably going to be looking at someone older with more life experience to bring to the party. This is going to make it much harder for the more vocationally-oriented teenagers to find employment.
When you’re calculating the cost of a new recruit – don’t overlook all the associated costs or you could find your profits end up being a lot lower than you expected.
