Budgeting for employment costs
Employee costs are a substantial element in many food and drink businesses. With the National Living Wage currently set at £7.83 per hour, Employer’s National Insurance starts kicking in after 20.7 hours have been worked. This pushes the cost on the employer up to £8.91 per hour for any additional hours worked by the individual.
Based on the example above, once 24.5 hours have been completed there is a requirement to comply with auto enrolment pension regulations. Currently, the employer contribution is 2% (rising to 3% in 2019).
Following on from the previous example, the pension contribution would take the rate to £9.08 per hour (for an employee over 25 years old), for every additional hour worked.
In addition to the above, holiday pay is a further cost to the business that should be accounted for. Analysis of gross margins and budgeting to control cost is one of the key drivers to a successful and profitable business.
If you would like help with cost control or management accounting, please let us know.