Tax Tip Week 26 – Calculating the Cost of an EmployeeWeek
Professional Contractors and Freelancers considering taking on an employee should calculate the true costs before committing to any fee rate of an additional person with the end client.
Other considerations should be whether to employ a permanent member of staff or use the services of a freelancer or professional contractor.
An employee costs an average of 21% of their salary and has employee rights after 12 weeks continual employment; and that's without making any profit for the company.
A salary of £20,000 would cost £21,828 including employer's national insurance contributions.
With effect from 6th April 2009 all employees are entitles to 5.6 weeks (maximum 28 days when working a 5 day week) paid holiday leave.
Therefore, your charge out rate would need to be a minimum of £94 per day to breakeven.
See our full guidance - Employees - Calculating the Real Cost in our knowledgebase.