Hiring A New Team Member; VA vs PAYE
Posted on 14th November 2022 at 12:06
So, you’re at the stage where you need to take on a new team member – Congratulations. But money is at that weird point where you can’t afford to say yes but at the same time you haven’t got the spare time to say no.
You’re not sure what to do and you’re not sure where to start looking for the answers. Well, I’ve got you. I know both sides of the fence very well. I was in the recruitment industry for almost 15 years (from office junior to agency owner/Director), and I’ve also been a VA now for over 8 years.
So, let’s get into what you need to know. Firstly a ‘cost’ can be both monetary or time. ‘Time is money’ and all that. This will be a quick breakdown but I’m happy to answer any questions you have about this subject.
When you employ someone PAYE you’ll have the following costs;
RECRUITMENT COSTS
Depending on how you go about recruiting your staff this can cost you £0 and a shed load of time, or if you go down the agency route, up to 30% of the applicant’s salary.
SALARY
This is one of the biggest costs you’ll have. It’s non-negotiable. You’ll need to make sure that salary is there EVERY month. It cannot be changed when you have a bad month and it’s illegal to pay your staff late.
NATIONAL INSURANCE CONTRIBUTIONS
The rates were 12% and 2% in 2021/22. The National Insurance rates between 6 April and 5 November 2022 include a 1.25% levy to directly support the NHS, bringing the rates to 13.25% and 3.25%. Following the Growth Plan statement at the end of September 2022, from 6 November 2022 the NIC rates drop down again. This cost is compulsory and must be paid for every PAYE employee over the threshold. You can find out more HERE.
PENSION
As part of the auto-enrolment scheme, employees are automatically signed up to a basic company pension scheme. This means employers must pay a minimum % of workers’ monthly salary towards a workplace pension.
TRAINING
Most companies offer either in-house training or funding for external training. Either way, this comes at a cost. It’s a vital cost as training can help improve employee retention rates. The average UK company spends over £1,000 per employee. If the training is done in-house and is effectively ‘free’, you need to look at the time this will take and work out the cost of the training from another employee’s time/cost.
EQUIPMENT
Unless you’re replacing someone else, you’ll need to provide a new employee with desk space, a computer, chair that fits their work requirements, uniform, stationery. This can soon add up.
BONUSES
Not all companies pay bonuses, but many are starting to come around to the idea as a way of rewarding good work and boosting employee retention. Even if the bonus is not monetary, and you treat your team to a day out, a massage, or other form of treat, you’ll still be shelling out for it. Let’s not forget that if you pay your PAYE team a bonus, this may also increase your NI Contribution too.
OTHER COSTS
It doesn’t end there. There is an assortment of other costs to consider such as the HR costs to deal with new starters, holiday cover, cover for maternity leave, sick days, company cars, software licenses, Employers Liability Insurance, and much more.
In September 2022 employees in the United Kingdom were earning a median pay of £2,141 per month. That’s an average salary of £25,695. If you add on all the extra costs involved, you’d need to look at budgeting around closer to £40,000 in your employees first year. That’s on average £3,333 per month.
When you outsource to a VA you’ll have the following costs;
RATE
Some VA’s have standard hourly rate, others offer packages for services. If you know you’re about to hit your low season, you may want to reduce your budget by changing the work that you give to your VA. This should be discussed with your VA in advance and you should give them as much notice as possible. They may offer to change your package or agree to less hours over a specific period of time.
TRAINING
You’ll need to get a VA up to speed and they may need training on any software or systems that they haven’t before. Some VA’s charge for the time it takes to train them, other’s offer this free as part of the contract set-up.
OTHER COSTS
You’ll need to cover the costs of any software or systems you require the VA to use on your behalf. This can include cloud storage, CRM, emails etc.
BONUSES
Non-essential but obviously, we wouldn’t say no!
That’s the basics. If you want any more information or help in your recruitment process / outsourcing, do let me know. I’m always happy to help.
Until next time,
Dee x
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