What are the costs of hiring an employee compared to working with a VA?
You want to hire support and expand your business; you’ve decided a salary and you’re ready to start recruiting – but have you considered the extra costs of hiring an in-office admin?
NI, Tax, and Pension Contributions
On top of your employee’s monthly salary, there are several contributions that you will have to make.
National Insurance rates differ depending on the employee’s earnings. If the employee earns between £823.01 to £4,189.00 per month during the 2022-23 tax year, the employer is required to contribute 15.05% of the earnings to National Insurance.
For example:
If the employee earns £1500.00 per month in band A, the employer’s contribution would be £111.67 per month.
In addition to National Insurance, the employer must pay tax and pension contributions. According to government guidelines, an employer must pay a minimum of 3% of the employee’s earnings over £6,240 per year into a company pension scheme.
If the employee earns £1500.00 per month, the employer will have to pay a minimum of £45.00 per month to a pension scheme.
All figures were produced using guidelines and calculators from the government website.
Non-working hours
If an employee works full time, they are typically on a 35-40 hour working week. However, employees do not work 35 hours per week, every week, for the entire year. Every employee is legally entitled to holidays, maternity/paternity leave, and statutory sick pay.
Employees are entitled to 28 days of paid holiday per year – the equivalent of 5.6 weeks. Bank holidays do not have to be given as paid leave, though many employers opt to include bank holidays in the 28 days of paid leave.
Statutory Sick Pay (SSP) is £99.35 per week for up to 28 weeks. If an employee is on leave due to illness and they have a contract with you, they are legally entitled to SSP and they cannot be paid less than £99.35 per week.
Statutory Maternity Pay (SMP) and Shared Parental Leave (SPL) are paid for up to 39 weeks. SMP and SPL are paid at 90% of the employee’s weekly earnings for the first 6 weeks and are paid at £156.66 or 90% of the average weekly earnings (whichever is lower) for the following 33 weeks.
Benefits and resources
Employee health and wellbeing are on the rise. With such a competitive market, many employers offer incentives and benefits to keep employees happy in their roles.
These incentives can include vouchers, gym memberships, cycle-to-work schemes, bonuses for meeting KPIs or sales targets, Christmas lunches, and company parties – the list is endless. While it may not seem like much, these costs really add up as the number of employees increases.
Employees also need a workspace – whether it be in the office or at home. An admin assistant, for example, would typically need a laptop or computer, a telephone, a printer/copier machine, a desk and chair, a headset, and so on.
You must also factor in training costs and software needed for the role. This can include things such as a Microsoft package, accounting software, and anti-virus software.
It’s all starting to add up, isn’t it? With an £18,000 salary, NI and pension contributions, holidays and sick pay, and other unexpected outgoings, the true cost of hiring an employee is more like £25,000 – £30,000 per year, if not more.
What’s different about working with a VA?
If all those sneaky costs are seeming a little much for you, we have good news!
When working with a VA, you only pay for the actual hours worked. Most VA’s have an hourly rate and retainer packages, which means you can pay by the hour, or you can buy a block of time for the month.
Outsourcing your business needs instead of hiring an employee eliminates plenty of those pesky costs. VA’s will pay their own tax, National Insurance and pension contributions. They will also pay for their own equipment and software.
As for holidays and sickness, you may be given notice that a VA will be unavailable but since you only pay for the time spent on your tasks, you would never have to pay the price for it!
Instead of hiring an employee at £18,000 per year and paying closer to 30k, try working with a VA and let the money you’ll save speak for itself!
