The true cost of taking on a new hire isn’t just the salary you agree to, there are additional employment costs and allowances you should consider before taking the leap for the first time, including:

• Monthly salary
• Employers National Insurance
• Employers Pension Contributions
• Employment Allowance (to cover Employer NICs)

Understanding how these factors are calculated and the timings on when each liability is paid are important considerations before hiring. Naturally, the employer is also responsible for deducting tax/NIC/Student Loan on the employee’s behalf too and will pay these balances over to HMRC with the Employer NICs.

A company director may be able to pay out higher levels of dividends than those from an unincorporated business without incurring additional taxation liabilities. Furthermore, employers’ national insurance contributions for the company director may be lower than those of an individual running their own business as an unincorporated entity.

An expert accountant can help to ensure that all salary payments, salary remuneration and other salaries are in line with HM Revenue & Customs (HMRC) rules.

Directors can make pension contributions as well as dividend payments which provide an efficient way for them to receive money from their business without paying high taxes whilst also ensuring that the director receives a qualifying period towards their state pension.

The director of a limited company has the advantage of being able to run a director-only payroll which can be an efficient way to manage income. By paying themselves a low salary, they are able to pay less personal tax on their income.