How much does a 40K p/a employee cost?

[Olly]

Hmm...
So the run down is :
40K salary
23 days holiday + 8 days public
4? days sick (we can take that one out of the calculation if it's cheeky)
some training
pension 3% (is that about average these days)
Employees NI
other things?

Question is what's an equivalent day rate to bill?
What do you reckon £250? - I guess I'd HAVE to use the holiday at that rate.

Ta

[Bright Spark]

On a salary of £40,000, net income per month is £2,460

To earn the same contracting, outside of IR35, you would need a rate of £23 per hour (£177 per day).

To earn the same contracting, inside of IR35, you would need a rate of £30 per hour (£230 per day).

HTH

[The Agents View]

Hmm...
So the run down is :
40K salary
23 days holiday + 8 days public
4? days sick (we can take that one out of the calculation if it's cheeky)
some training
pension 3% (is that about average these days)
Employees NI
other things?

Question is what's an equivalent day rate to bill?
What do you reckon £250? - I guess I'd HAVE to use the holiday at that rate.

Ta

As a rough estimate - I would expect a direct comparison to be closer to £300 pd - taking into account contractor risk and PI and everything else, I would advise £350 personally.

[malvolio]

For the nth time, the working approximation is annual salary / 1000 gives the hourly rate. So £25k pa is £25 an hour to return the same net.

[blacksheep]

The two companies I contracted for for most recently, estimate that the cost of a permanent employee is either Salary+33% or Salary+40%

There are about 260 possible working days in a UK year. Taking away 12 bank holidays, 25 days holiday, 3 sick days, would give you 220 payable days as a contractor.

40k plus 40% is £56k, so to be "cost neutral" to the company, a contractor would cost £280/day(*) for 220 days

(*) including any overhead the company pays to an agency if they are not getting someone direct.

it seems there are several possible options for answering this question!

[Olly]

I was trying to figure out what the employee costs.
Not how much I'd need to get 40K
Not how much to factor in re insurance and risk

This is just an exercise in justifying the max day rate I can present to a client that would be paying 40K to a permy plus the benefits.

The role on the contract market would probably be low 300s but that's irrelevant here.

[Olly]

the agency commission doesn't need to be considered....it's just the costs I mentioned really.

ermm...what's employer's NI rate? I've forgotten since my Ltd pays none

[northernladuk]

I was trying to figure out what the employee costs.
Not how much I'd need to get 40K
Not how much to factor in re insurance and risk

This is just an exercise in justifying the max day rate I can present to an employer that would be paying 40K to a permy plus the benefits.

The role on the contract market would probably be low 300s but that's irrelevant here.

When we budget for a full time perm we just double the cost but we were planning on 30-35k region and it was very rule of thumb (lol not that you guessed) but HR and finance people were quite happy with this figure.

35K person costs the company 70K. Job done.

If this scales in anyway as job goes up and down I dont have a clue... and to be honest when were budgetting we didn't really care. It was a reasonable number and wasn't exactly going ot have an impact on a 6 to 7 figure budget.

You could hazard a guess they have been just as woolley with their valuations.

[Bright Spark]

you also forgot about bonus, + other benefits you get as
an employee like sickness pay and employment rights etc.

as a contractor you are taking a lot more risks which you have
to factor in so you can never completely compare both types purely
on money.

[Lester]

AIUI the minimum direct cost to the employer would be £40,000 plus 12.8% NI (~£5,120) = £45,120.

Employer's pension contributions are pretty variable. 0% is not uncommon, it's 7% for the permies at my clientco.