Employer On Costs 2009/10

Employers are required to make an earnings related contribution, which is then paid to the Inland Revenue with the employees contribution that has been deducted from the salary.

The current rate of employers NI is 12.8% on earnings above the earnings level, which is currently £5715.

To work out the amount of employers NI, a simple calculation is required to multiply the earnings above the threshold by the rate of NICs.

For Example:

An employee earns £15,000 per annum

15,000 minus 5715 = 9285

9285 X 12.8% = 1188.48

The employers NI for this worker can be rounded up to £1189 per annum.

The on cost for the employer will depend on how much the employer decides to contribute to the pension scheme, this can vary between 6% and 12%.

To work out the cost the gross salary should be multiplied by the percentage.

For Example:

Salary: £15,000

Pension contribution: 7%

15,000 X 7% = 1050

Cost of pension contribution per annum for this worker is £1050

If the organisation has more than 5 employees it has a legal obligation to provide access for those employees to a stakeholder pension scheme if there is no other pension scheme provided.

If your funding bid is to cover several years you will need to build in enough funds to cover the cost of living rise in salaries each year. You may also wish to provide increments for your employees, particularly if you are following a recognised payscale such as the NJC scale, and these will have to be allowed for in your costings.

For Example:

Year 1 (06) Year 2 (07) Year 3 (08)

NJC Spinal Point 22 18,450 18,907 19427

NJC Spinal Point 23 18,993 19,463 19998

NJC Spinal Point 24 19,614 20,099 20652

If the employee started on Point 22 in 2006 and had a cost of living rise and an increment rise every year this would increase the cost to the organisation by over £2,000, so it is important to get it right.

If you do not have a worker or a management committee member who is able to do PAYE for the organisation, you will also have to allow for the costs of a payroll service.

Remember you have a legal obligation to provide your employees with a payslip and HMRC will charge interest and penalties on any tax and National Insurance that should have been paid over to them.

Payroll Service

National Insurance

Funding Bids

Pensions

For more information please contact: Alison McCrave

Tel: 0114 253 6621

Email: a.mmccrave@vas.org.uk

Visit: www.vas.org.uk