New to actually employing people. What's the cost?
Discussion
I run a taxi company. At the moment, I provide all the tools a driver needs to make money. I give him a fully insured, fueled, clean licensed vehicle to drive for his shift. He then drops that car off at the end of his shift.
He pays us 60% of all the fares we give him at the end of his shift. BUT, as he is responsible for collecting the money, he remains self employed.
Now... This works for us. We've got ourselves a driver to cover our work, we take a percentage of the fare to cover our costs and make a profit, we also get a driver who doesn't cost us anything in N.I contributions and who is self employed so won't be paid for being off sick or holidays or anything.
Trouble is, just lately... We've been finding work much, much quicker than we can find driver cover. If I could just find the right number of drivers I would really be laughing!
<---- See?
I'm really fussy who I take on, and your typical grumpy taxi driver doesn't really cut the mustard with our service. People who apply from outside the industry won't be licensed and usually can't afford to pay the £200 odd for a license, or afford to wait the 6 weeks it takes for CRB checks etc.
If I pay for their license, there is nothing to stop them walking as soon as the licence is in their hands. After all, there is no contract of employment etc.
So what to do? I'd really like to start employing drivers, and sponsoring them into the business. Maybe start a small courier service to give them some work while their licence application is processed.
But what does that cost in terms of time and money? ie: How much will it add to my workload in payroll, working out tax etc etc?
What NI contributions would I have to make as an employer? What's the score with sickness and holidays? I don't want to end up with a bunch of workshy
s that I then struggle to get rid of.
HELP
He pays us 60% of all the fares we give him at the end of his shift. BUT, as he is responsible for collecting the money, he remains self employed.
Now... This works for us. We've got ourselves a driver to cover our work, we take a percentage of the fare to cover our costs and make a profit, we also get a driver who doesn't cost us anything in N.I contributions and who is self employed so won't be paid for being off sick or holidays or anything.
Trouble is, just lately... We've been finding work much, much quicker than we can find driver cover. If I could just find the right number of drivers I would really be laughing!
<---- See?I'm really fussy who I take on, and your typical grumpy taxi driver doesn't really cut the mustard with our service. People who apply from outside the industry won't be licensed and usually can't afford to pay the £200 odd for a license, or afford to wait the 6 weeks it takes for CRB checks etc.
If I pay for their license, there is nothing to stop them walking as soon as the licence is in their hands. After all, there is no contract of employment etc.
So what to do? I'd really like to start employing drivers, and sponsoring them into the business. Maybe start a small courier service to give them some work while their licence application is processed.
But what does that cost in terms of time and money? ie: How much will it add to my workload in payroll, working out tax etc etc?
What NI contributions would I have to make as an employer? What's the score with sickness and holidays? I don't want to end up with a bunch of workshy
s that I then struggle to get rid of.HELP
KingRichard
If you work on the salary cost of the employee being 110% of their salary this will approx cover you for the employer NI.
As far as working out PAYE goes, I would suggest you jeust get your accountant to do it, most accountants offer Payroll services for their clients. My last accountant charged about £12-15 per month for each employee (2 man company), less with volume and for that they will do the Payroll, ie tell you how much to Pay to the employee and HMRC, undertake preparation of the year end sheets, issuing of P60s, etc. Some may include P11Ds into this mix as well.
Talk to your accountant first
davidy
If you work on the salary cost of the employee being 110% of their salary this will approx cover you for the employer NI.
As far as working out PAYE goes, I would suggest you jeust get your accountant to do it, most accountants offer Payroll services for their clients. My last accountant charged about £12-15 per month for each employee (2 man company), less with volume and for that they will do the Payroll, ie tell you how much to Pay to the employee and HMRC, undertake preparation of the year end sheets, issuing of P60s, etc. Some may include P11Ds into this mix as well.
Talk to your accountant first
davidy
DavidY said:
KingRichard
If you work on the salary cost of the employee being 110% of their salary this will approx cover you for the employer NI.
As far as working out PAYE goes, I would suggest you jeust get your accountant to do it, most accountants offer Payroll services for their clients. My last accountant charged about £12-15 per month for each employee (2 man company), less with volume and for that they will do the Payroll, ie tell you how much to Pay to the employee and HMRC, undertake preparation of the year end sheets, issuing of P60s, etc. Some may include P11Ds into this mix as well.
Talk to your accountant first
davidy
Right, they will actually do this? Cool If you work on the salary cost of the employee being 110% of their salary this will approx cover you for the employer NI.
As far as working out PAYE goes, I would suggest you jeust get your accountant to do it, most accountants offer Payroll services for their clients. My last accountant charged about £12-15 per month for each employee (2 man company), less with volume and for that they will do the Payroll, ie tell you how much to Pay to the employee and HMRC, undertake preparation of the year end sheets, issuing of P60s, etc. Some may include P11Ds into this mix as well.
Talk to your accountant first
davidy
Are you talking from an employers perspective, and what sector if I may ask?
KingRichard
Yes from an employers persepctive. I have used Account based payroll services in my last 4 companies (ranging from 2 to 30 employees). All companies have been IT related. Even now with just 2 employees I use it, as it just makes my life easier and in the 15-30 mins a month it would take me to work out the PAYE, I can earn more than I'm paying the accountant
If your accountant doesn't do it, there are many larger accountants who offer a Payroll service to anyone.
davidy
Yes from an employers persepctive. I have used Account based payroll services in my last 4 companies (ranging from 2 to 30 employees). All companies have been IT related. Even now with just 2 employees I use it, as it just makes my life easier and in the 15-30 mins a month it would take me to work out the PAYE, I can earn more than I'm paying the accountant
If your accountant doesn't do it, there are many larger accountants who offer a Payroll service to anyone.
davidy
DavidY said:
KingRichard
Yes from an employers persepctive. I have used Account based payroll services in my last 4 companies (ranging from 2 to 30 employees). All companies have been IT related. Even now with just 2 employees I use it, as it just makes my life easier and in the 15-30 mins a month it would take me to work out the PAYE, I can earn more than I'm paying the accountant
If your accountant doesn't do it, there are many larger accountants who offer a Payroll service to anyone.
davidy
Thanks for that Yes from an employers persepctive. I have used Account based payroll services in my last 4 companies (ranging from 2 to 30 employees). All companies have been IT related. Even now with just 2 employees I use it, as it just makes my life easier and in the 15-30 mins a month it would take me to work out the PAYE, I can earn more than I'm paying the accountant
If your accountant doesn't do it, there are many larger accountants who offer a Payroll service to anyone.
davidy
I guess what you're really saying is it gives you 15-30 minutes a month free to post on PH?
I know your game! 
Were your employees on any kind of performance related pay? I'm a bit worried about having to pay staff a wage, and then Statutory Sick Pay, Holidays and all that caper. I know that sounds pretty tight but I want to be sure of all the ramifications!
Can you write an employment contract with a financial penalty for leaving within a 12 month period? Could it be legally enforcable?
Cheers
KingRichard
We had several memebers of staff in the 30 man company on Monthly Commission plus annual bonsuses. Once a month we would just submit to the accountant the gross salries, 48hrs later we would get back the Net figures plus all the HMRC figures, and they would send us the payslips in the post (you could get these sent direct to the employee's home address)
Regarding draconian employment contracts, you can write what you like, whether any employees would sign it or whether in reality it would stand up in court (remember you would be the aggressor chasing your penalty) is another matter.
Much better to put a long term bonus incentive scheme in place, ie after 12 months you get a bonus of x and after 24 months you get a bonus of y etc. be careful how this is structed though as you don't want all your drivers leaving at once do you! Might me better to put in place a quarterly bonus payable at the end of the next quarter, if you leave beforehand you loose your bonus entitlement, that way you've got a sort of rolling golden handcuffs. Watch out that you still have clean exit strategies to ensure you can get rid of a non-performing driver though.
davidy
We had several memebers of staff in the 30 man company on Monthly Commission plus annual bonsuses. Once a month we would just submit to the accountant the gross salries, 48hrs later we would get back the Net figures plus all the HMRC figures, and they would send us the payslips in the post (you could get these sent direct to the employee's home address)
Regarding draconian employment contracts, you can write what you like, whether any employees would sign it or whether in reality it would stand up in court (remember you would be the aggressor chasing your penalty) is another matter.
Much better to put a long term bonus incentive scheme in place, ie after 12 months you get a bonus of x and after 24 months you get a bonus of y etc. be careful how this is structed though as you don't want all your drivers leaving at once do you! Might me better to put in place a quarterly bonus payable at the end of the next quarter, if you leave beforehand you loose your bonus entitlement, that way you've got a sort of rolling golden handcuffs. Watch out that you still have clean exit strategies to ensure you can get rid of a non-performing driver though.
davidy
DavidY said:
KingRichard
We had several memebers of staff in the 30 man company on Monthly Commission plus annual bonsuses. Once a month we would just submit to the accountant the gross salries, 48hrs later we would get back the Net figures plus all the HMRC figures, and they would send us the payslips in the post (you could get these sent direct to the employee's home address)
Regarding draconian employment contracts, you can write what you like, whether any employees would sign it or whether in reality it would stand up in court (remember you would be the aggressor chasing your penalty) is another matter.
Much better to put a long term bonus incentive scheme in place, ie after 12 months you get a bonus of x and after 24 months you get a bonus of y etc. be careful how this is structed though as you don't want all your drivers leaving at once do you! Might me better to put in place a quarterly bonus payable at the end of the next quarter, if you leave beforehand you loose your bonus entitlement, that way you've got a sort of rolling golden handcuffs. Watch out that you still have clean exit strategies to ensure you can get rid of a non-performing driver though.
davidy
Maybe draconian is too strong a word there, or maybe I could have phrased it better myself We had several memebers of staff in the 30 man company on Monthly Commission plus annual bonsuses. Once a month we would just submit to the accountant the gross salries, 48hrs later we would get back the Net figures plus all the HMRC figures, and they would send us the payslips in the post (you could get these sent direct to the employee's home address)
Regarding draconian employment contracts, you can write what you like, whether any employees would sign it or whether in reality it would stand up in court (remember you would be the aggressor chasing your penalty) is another matter.
Much better to put a long term bonus incentive scheme in place, ie after 12 months you get a bonus of x and after 24 months you get a bonus of y etc. be careful how this is structed though as you don't want all your drivers leaving at once do you! Might me better to put in place a quarterly bonus payable at the end of the next quarter, if you leave beforehand you loose your bonus entitlement, that way you've got a sort of rolling golden handcuffs. Watch out that you still have clean exit strategies to ensure you can get rid of a non-performing driver though.
davidy
I like the idea of golden handcuffs though, rather than concentrating on the negatives. I would need some kind of clause for recovering training costs if they left of their own accord within say 3 months or so...
The rolling bonus paid in arrears is a clever way to do things as well. Thanks
DavidY said:
Sorry enlighten me, what does VAT have to do with employees???
davidy
We currently pay VAT on the 60% of the fare. If we employ the drivers, we are then taking 100% of the fare, so we then become liable for VAT on 100% of the fare.davidy
Something to do with Agent and Principle?
I'd forgotten about that cabbage. Bum.
OK, so an industry I'm unfamiliar with! but surely that just a case of setting the salary at the correct level to avaoid incurring more costs. It would be normal for a salaried peson to be on les than a self employed (contractor) anyway, and they get the benefits of sick pay, holidays, etc
Oh and while we are at it don't forget the impact of stakeholder pensions.
I suggest you spend 30mins of your accountants time and go through it with him/her
davidy
Oh and while we are at it don't forget the impact of stakeholder pensions.
I suggest you spend 30mins of your accountants time and go through it with him/her
davidy
DavidY said:
OK, so an industry I'm unfamiliar with! but surely that just a case of setting the salary at the correct level to avaoid incurring more costs. It would be normal for a salaried peson to be on les than a self employed (contractor) anyway, and they get the benefits of sick pay, holidays, etc
Oh and while we are at it don't forget the impact of stakeholder pensions.
I suggest you spend 30mins of your accountants time and go through it with him/her
davidy
That's looking like the better option Oh and while we are at it don't forget the impact of stakeholder pensions.
I suggest you spend 30mins of your accountants time and go through it with him/her
davidy
Do you have to provide a stakeholder pension? I've never had one that I've been aware of
I would suggest that going down this route may cause you more problems than you think.
PAYE, NI and all that can quickly become a fast consuming part of your business. This becomes all the more difficult if the employees are working flexible hours and you have to match this to timesheets - if this changes each month so does the calculations for PAYE, Employees NI and Employers NI.
I would say in this instance you could either:
1) Learn how to do it yourself, and do it each month, however if your business is doing well you would be better off spending your time earning money!
2) Get an outside agency to do it at extra cost
3) Get someone in part time to do it.
However, although this is a solution I am still not convinced the ramifications are of benefit to you. Of course, as others have said the 110% figure is goo - as a starting point. Now factor into the equation that you need to pay them for at least 4 weeks each year PAID holiday. Factor into the fact that if they are sick you dont have to pay for the first few days legally, but many employees expect sick pay, and after they are ill for the first few days it is a legal requirement to pay statutory sick pay.
If you have 5 or more employees you must also legally offer pension facilities... though your bank should be able to sort this.
The other factor is getting rid. If someone is bringing the company down for what ever reason if they are self-employed that is easy. As an employee you need to follow a strict procedure of warning, disciplinaries, options of appeals etc before you can sack them. If you fail to follow the procedure in the current climate this can automatically make an unfair dismissal claim possible.
To be honest, my advice would be 'if it aint broke...'. However, I would look at a halfway house by employing one or two people and seeing how it goes first.
With regards to you paying out for licences etc, a simple contract could protect you without them being employees.
PAYE, NI and all that can quickly become a fast consuming part of your business. This becomes all the more difficult if the employees are working flexible hours and you have to match this to timesheets - if this changes each month so does the calculations for PAYE, Employees NI and Employers NI.
I would say in this instance you could either:
1) Learn how to do it yourself, and do it each month, however if your business is doing well you would be better off spending your time earning money!
2) Get an outside agency to do it at extra cost
3) Get someone in part time to do it.
However, although this is a solution I am still not convinced the ramifications are of benefit to you. Of course, as others have said the 110% figure is goo - as a starting point. Now factor into the equation that you need to pay them for at least 4 weeks each year PAID holiday. Factor into the fact that if they are sick you dont have to pay for the first few days legally, but many employees expect sick pay, and after they are ill for the first few days it is a legal requirement to pay statutory sick pay.
If you have 5 or more employees you must also legally offer pension facilities... though your bank should be able to sort this.
The other factor is getting rid. If someone is bringing the company down for what ever reason if they are self-employed that is easy. As an employee you need to follow a strict procedure of warning, disciplinaries, options of appeals etc before you can sack them. If you fail to follow the procedure in the current climate this can automatically make an unfair dismissal claim possible.
To be honest, my advice would be 'if it aint broke...'. However, I would look at a halfway house by employing one or two people and seeing how it goes first.
With regards to you paying out for licences etc, a simple contract could protect you without them being employees.
JustinP1 said:
I would suggest that going down this route may cause you more problems than you think.
PAYE, NI and all that can quickly become a fast consuming part of your business. This becomes all the more difficult if the employees are working flexible hours and you have to match this to timesheets - if this changes each month so does the calculations for PAYE, Employees NI and Employers NI.
I would say in this instance you could either:
1) Learn how to do it yourself, and do it each month, however if your business is doing well you would be better off spending your time earning money!
2) Get an outside agency to do it at extra cost
3) Get someone in part time to do it.
However, although this is a solution I am still not convinced the ramifications are of benefit to you. Of course, as others have said the 110% figure is goo - as a starting point. Now factor into the equation that you need to pay them for at least 4 weeks each year PAID holiday. Factor into the fact that if they are sick you dont have to pay for the first few days legally, but many employees expect sick pay, and after they are ill for the first few days it is a legal requirement to pay statutory sick pay.
If you have 5 or more employees you must also legally offer pension facilities... though your bank should be able to sort this.
The other factor is getting rid. If someone is bringing the company down for what ever reason if they are self-employed that is easy. As an employee you need to follow a strict procedure of warning, disciplinaries, options of appeals etc before you can sack them. If you fail to follow the procedure in the current climate this can automatically make an unfair dismissal claim possible.
To be honest, my advice would be 'if it aint broke...'. However, I would look at a halfway house by employing one or two people and seeing how it goes first.
With regards to you paying out for licences etc, a simple contract could protect you without them being employees.
At the moment my drivers work without a contract. Could I keep their 'self employed' status if I had a signed contract stating that they would only cover work for me, and if they leave etc etc?PAYE, NI and all that can quickly become a fast consuming part of your business. This becomes all the more difficult if the employees are working flexible hours and you have to match this to timesheets - if this changes each month so does the calculations for PAYE, Employees NI and Employers NI.
I would say in this instance you could either:
1) Learn how to do it yourself, and do it each month, however if your business is doing well you would be better off spending your time earning money!
2) Get an outside agency to do it at extra cost
3) Get someone in part time to do it.
However, although this is a solution I am still not convinced the ramifications are of benefit to you. Of course, as others have said the 110% figure is goo - as a starting point. Now factor into the equation that you need to pay them for at least 4 weeks each year PAID holiday. Factor into the fact that if they are sick you dont have to pay for the first few days legally, but many employees expect sick pay, and after they are ill for the first few days it is a legal requirement to pay statutory sick pay.
If you have 5 or more employees you must also legally offer pension facilities... though your bank should be able to sort this.
The other factor is getting rid. If someone is bringing the company down for what ever reason if they are self-employed that is easy. As an employee you need to follow a strict procedure of warning, disciplinaries, options of appeals etc before you can sack them. If you fail to follow the procedure in the current climate this can automatically make an unfair dismissal claim possible.
To be honest, my advice would be 'if it aint broke...'. However, I would look at a halfway house by employing one or two people and seeing how it goes first.
With regards to you paying out for licences etc, a simple contract could protect you without them being employees.
Maybe I could offer them 45% instead of 40% if they signed the contract as that gives me more security.
Thoughts on this?
KingRichard said:
DavidY said:
Sorry enlighten me, what does VAT have to do with employees???
davidy
We currently pay VAT on the 60% of the fare. If we employ the drivers, we are then taking 100% of the fare, so we then become liable for VAT on 100% of the fare.davidy
Something to do with Agent and Principle?
I'd forgotten about that cabbage. Bum.
IMO this will cost you significant amounts of time and money. The bonus scheme or something similar could be applied to self-employed drivers as well to incentivise and retain.
Be wary of how easy it is to get employees and so bloody hard to get rid of them. Couple this with ever increasing employees rights and entitlements and you have a huge can of worms.
Finally we predicted a clash of self-employed vs. employed on the driver front due to allocation of work and perception of pay.
My accountants payroll fees worked out to about £1500-2000p.a. for about a dozen employees.
RedCabbage said:
If you remember I was trying to go the other way!
IMO this will cost you significant amounts of time and money. The bonus scheme or something similar could be applied to self-employed drivers as well to incentivise and retain.
Be wary of how easy it is to get employees and so bloody hard to get rid of them. Couple this with ever increasing employees rights and entitlements and you have a huge can of worms.
Finally we predicted a clash of self-employed vs. employed on the driver front due to allocation of work and perception of pay.
My accountants payroll fees worked out to about £1500-2000p.a. for about a dozen employees.
Yes, I remember IMO this will cost you significant amounts of time and money. The bonus scheme or something similar could be applied to self-employed drivers as well to incentivise and retain.
Be wary of how easy it is to get employees and so bloody hard to get rid of them. Couple this with ever increasing employees rights and entitlements and you have a huge can of worms.
Finally we predicted a clash of self-employed vs. employed on the driver front due to allocation of work and perception of pay.
My accountants payroll fees worked out to about £1500-2000p.a. for about a dozen employees.
We've had similar discussions about drivers perceptions... Taxi drivers are the same the world over, it would seem
Do your drivers sign any kind of contract? I think it could work quite nicely to create a perception that we're a decent company to come and work for. If we offer incentives as part of the deal... maybe for hours worked in a period, or takings in a shift or something. That could be cool.
Just need to work out if this contract could be legal?
KingRichard said:
JustinP1 said:
I would suggest that going down this route may cause you more problems than you think.
PAYE, NI and all that can quickly become a fast consuming part of your business. This becomes all the more difficult if the employees are working flexible hours and you have to match this to timesheets - if this changes each month so does the calculations for PAYE, Employees NI and Employers NI.
I would say in this instance you could either:
1) Learn how to do it yourself, and do it each month, however if your business is doing well you would be better off spending your time earning money!
2) Get an outside agency to do it at extra cost
3) Get someone in part time to do it.
However, although this is a solution I am still not convinced the ramifications are of benefit to you. Of course, as others have said the 110% figure is goo - as a starting point. Now factor into the equation that you need to pay them for at least 4 weeks each year PAID holiday. Factor into the fact that if they are sick you dont have to pay for the first few days legally, but many employees expect sick pay, and after they are ill for the first few days it is a legal requirement to pay statutory sick pay.
If you have 5 or more employees you must also legally offer pension facilities... though your bank should be able to sort this.
The other factor is getting rid. If someone is bringing the company down for what ever reason if they are self-employed that is easy. As an employee you need to follow a strict procedure of warning, disciplinaries, options of appeals etc before you can sack them. If you fail to follow the procedure in the current climate this can automatically make an unfair dismissal claim possible.
To be honest, my advice would be 'if it aint broke...'. However, I would look at a halfway house by employing one or two people and seeing how it goes first.
With regards to you paying out for licences etc, a simple contract could protect you without them being employees.
At the moment my drivers work without a contract. Could I keep their 'self employed' status if I had a signed contract stating that they would only cover work for me, and if they leave etc etc?PAYE, NI and all that can quickly become a fast consuming part of your business. This becomes all the more difficult if the employees are working flexible hours and you have to match this to timesheets - if this changes each month so does the calculations for PAYE, Employees NI and Employers NI.
I would say in this instance you could either:
1) Learn how to do it yourself, and do it each month, however if your business is doing well you would be better off spending your time earning money!
2) Get an outside agency to do it at extra cost
3) Get someone in part time to do it.
However, although this is a solution I am still not convinced the ramifications are of benefit to you. Of course, as others have said the 110% figure is goo - as a starting point. Now factor into the equation that you need to pay them for at least 4 weeks each year PAID holiday. Factor into the fact that if they are sick you dont have to pay for the first few days legally, but many employees expect sick pay, and after they are ill for the first few days it is a legal requirement to pay statutory sick pay.
If you have 5 or more employees you must also legally offer pension facilities... though your bank should be able to sort this.
The other factor is getting rid. If someone is bringing the company down for what ever reason if they are self-employed that is easy. As an employee you need to follow a strict procedure of warning, disciplinaries, options of appeals etc before you can sack them. If you fail to follow the procedure in the current climate this can automatically make an unfair dismissal claim possible.
To be honest, my advice would be 'if it aint broke...'. However, I would look at a halfway house by employing one or two people and seeing how it goes first.
With regards to you paying out for licences etc, a simple contract could protect you without them being employees.
Maybe I could offer them 45% instead of 40% if they signed the contract as that gives me more security.
Thoughts on this?
EricMc or someone knows the exact terminology - something called IR35 I think!
Even though they are self employed you can still have a contract with them. Indeed, if you already have an agreement for them to do work and you to pay them then in effect you already have a contract in place. With regard to new people and getting them a licence a quick contract of your terms would be pretty easy to knock up. If you made them sign something that if during the time they work for you they dont complete a certain number of shift or turnover before they leave then they have to pay back the £200 or whatever the licence cost on their behalf.
Indeed a more watertight way of putting it would be that you are offering them a zero-interest loan for the £200 which they are using to get a licence for them. After a years service, the loan is cancelled, however if they don't last they year or don't work for you for a period of X weeks the loan must be repaid immediately.
KingRichard said:
RedCabbage said:
Do you mean a contract as an employee or self employed?
As self employed. If that is indeed possible.You take the contract of employment, slightly alter it and rename it Sub Contractor Agreement.
Of course at interview stage(or introduction to existing drivers) you 'sell' it as a mutually benefitial agreement, designed to clarify your working relationship and avoid any misunderstandings.
I have an example contract of employment as a basis if you are interested. It just requires you to modify it to suit your needs, convert it to a subbie agreement and update it according to the latest employment law etc.
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