True Cost of an Employee Calculator

Regardless of how much money you have, how much income your business is taking in, or what industry you are in, it's important that you know where the money that you're spending is going. This is to ensure that you know your money is paying for only the essentials, and that none of it is being wasted. One of the biggest costs of a company is paying for staffing costs, although staffing costs don't just include their wages. These costs include all additional expenditures which are known as "on-costs". Our calculator has been developed in order to increase your awareness on how much money you are actually spending on staffing as well as helping you to plan ahead for your next financial year. Not only will our Employee Calculator calculate your total costs, but it will also provide you with an additional pie chart that displays how the percentages of staffing costs break down.

Our True Cost of an Employee Calculator has similarities to our Cost Per Hire Calculator although has the addition of living income tax as well as salary deductions for any employees who are working in the United Kingdom.

The 'True Cost of an Employee' Calculator Guide

Our 'True Cost of an Employee' Calculator has been developed in order to show you all of the financial costs that should be factored in if you decide to hire a new employee. Our calculator is targeted for the use of senior staff and management. It offers you the ability to find the cost of hiring a new employee as well as setting them up in a new office without any of your existing resources. While this isn't completely essential for a static company, it allows companies which are more flexible to get an accurate cost for setting up a new company branch in a new location.

To provide first time users with a simple experience, the calculator has already had the most common percentage rates and minimum costing fees entered into it as their default values. These values are there for your own use and to provide you with a goal to work towards, or a benchmark, when it comes to your costing analysis. We are happy to hear your feedback as well as any suggestions which concern our 'True Cost of an Employee' calculator.

Annual Basic Salary

This is the amount of money which you pay each staff member of your company before any benefits are included. This amount should not be confused with the 'gross pay' amount as tax deductions, national insurance, pension schemes, bonuses, or any dividend shares, are all ignored in this case. Gross Pay includes all of the money which is paid to an employee, including bonuses and benefits.

Annual-Bonus

Annual Bonuses are a fantastic way in which to keep staff productive. This is used in many companies as an incentive in order to keep staff happy, working hard, and cooperative with the management team. If a gift is given from an employer to an employee, it is seen as a 'benefit in kind', and tax must be paid on these gifts too which is why a value must be assigned to the item. Although, there are sometimes exceptions to this.

Taxable Income

Most people will have Personal Tax Allowance, which is the income in which they will not have to pay tax on, otherwise known as tax-free. On top of this, under certain circumstances other groups of people may have the ability to receive additional allowances. This includes Blind Persons Allowance or Disability Allowance.

Employer National Insurance Contributions

NIC, otherwise known as National Insurance Contributions, are not only paid by employees but also employers. They are a mandatory payment and are known as Class 1 contributions. Employee NICs are taken from their overall gross pay, therefore don't cost the company anything. This is known as a Class 1 Primary Contribution. On the other hand, Employer NICs differ based on the wages that are paid out by the company. This is known as a Class 1 Secondary Contribution. To calculate Employers National Insurance Contributions, click here.

True Salary Cost

This amount includes the sum of an employee's basic pay, their bonuses, and the Employer's NICs. This is how much a company pays out to their employees without including any medical plans or other schemes.

For example, if John has a basic salary of £10,000 per year and receives an annual bonus of £1,000, then his employer has paid him a total of £11,000. On top of that the employer will have to pay Employer NICs which is a total of £262.20. This means that the True Salary cost is equal to £11,262.20. This is the sum of the basic salary, the annual bonus, and any NICs.

Company Pension

The idea of having a company pension scheme has become increasingly popular in the recent years and is in fact mandatory for employers to offer it to their employees. Employers are unable to stop an employee from joining the scheme, although they cannot force them to join it either. This is the case even if the employee isn't eligible to do so.

Private Medical

While in the UK this is still a growing matter, it is popular in the US for employers to offer private medical care. This is another one of those 'benefits in kind' perks that an employer is able to offer an employee. Private medical plans may include dental care on top of the standard health care, which includes not only when they are at home but if they are away abroad.

Company Car

Depending on the nature of the work, employees frequently receive use of a company car as part of their benefits package.

Shares Equity

Employers are able to give employees shares, and some of these benefits will be recognised by the employment. This includes tax relief. Though the company will take cost of providing these shares, they may also be eligible for tax relief depending on the circumstances. There are currently four schemes which are approved and allow employees to find tax relief and NICs beneficial. When the time comes, employers must fill out forms for HMRC which advise which schemes they are running. There are strict controls which monitor this.

Total Employee Benefits

This is the total amount of any provisions which an employer has given an employee as a benefit. This amount is not a part of their salary agreement or any bonuses. This is the amount that the company pays out each year for schemes such as pensions, any medical insurances, and even company cars.

For example, if Emma pays a certain amount into her pension plan, and her employer contributes £2,500 to her pension plan each year, and on top of this her medical insurance has cost her employer £1,000 each year, then the Total Employee benefits amount to £3,500.

Advertising Costs

These costs are unknown and cannot be predicted by the company, unless they take time to define an advertising campaign and plan out their every step. If not tracked correctly, then advertising costs could be sky high, which is why it is important for a company to set a budget and keep a close eye on the campaign itself.

Agency Fees

These are the costs which a company pays another company in order to take care of a certain aspect of work. For example, any freelancing work that a company may pay for.

Recruiter Costs

These are the costs that a company pays in order for an external workforce to find suitable staff to hire. These costs may include travel costs, stationery costs, or location costs depending on where the interview is held.

Training Costs

To make sure that you have an effective and productive staff team, it's important that they know the essential information about the industry they will be working in, which is why it is essential to train your staff. Health and Safety awareness is required by Law, along with other training courses. Training your staff should include not only working with your employee's personal qualities, but also developing new skills which they will find helpful while working for you.

Employee Referral Costs

Employee Referral Costs are the costs which are associated with finder's fees or if an employee recommends for the company to hire a certain individual who is then hired.

Travel Costs

Travel Costs are important to understand. As a company, it's important that you set limits on whether or not you will pay for all of your employees travel costs, or if you will pay a contribution to it. When it comes to this, take time to decide which of your employees will be eligible for travel costs and whether or not you will reimburse them for them. Depending on the situation, travel costs can often be subject to tax relief.

Relocation Costs

A Relocation Cost is the amount that a company will provide an individual with who is in need of a new home to live in, in which is needed for them to proceed with their work. When it comes to relocation costs, a lot of things are considered. Physical costs of the moving process, paid leave time, furnishing the home, and even storing the employee's furniture. All of these are taken into consideration when relocation costs are discussed.

Management Administrator Costs

Meetings, stationery, hospitality, all of these come under Management Administrator Costs.

Payroll Costs

Payroll Costs is the money which contributes towards the preparation and distribution of paying staff. If a business uses an external company in order to help them file their payments, then this would be considered a payroll cost.

Legal Costs

Legal costs include any insurances that a company has to take into consideration, as well as any assurances or legislative requirement costs. When a company is recruiting an employee on an international level, it is important that they take the time to have any contracts that will be involved looked over by an International Employment Lawyer.

Total Onboarding Costs

An onboarding cost is the amount of money which is used to pay for hiring an employee, although is only a one-time payment. This does not include any payments that are ongoing.

Office Setup

This includes any costs that are used in order to get an office location up and running. These costs may vary depending on the location.

Communications Setup

These costs include basic communication methods such as the Internet, Mobile Phones, Fax machines, as well as Landline Telephone Costs. The standard UK business setup costs would be around £150 per month, although it is safer to use £200 as a benchmark value in order to leave space for any installation costs that may apply.

Line Manager Resource

Human Resources, Health and Safety, Financial Care, Pastoral Care. All of these costs are drawn under Line Manager Resources.

Total Facilities and Other Costs

These costs are the total amount including the office setup costs, communication setup costs, and the line management costs.

True Cost of an Employee

The True Cost of an Employee is higher than one may expect. While the average person may think that the cost of an employee is simply their salary, there is also a variety of other expenses such as National Insurance Contributions or even Private Health Care. After the first year of employing staff, you will notice that your staffing costs will drop due to onboarding costs only being expenses in the first year.

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