|Always Agree a Gross Wage|
Within domestic staff recruitment and employment, it is still surprisingly common for wages to be discussed and agreed on a net (i.e. take home) rather than a gross basis. Whilst it may be helpful for the employee to know how much money they'll have in their pocket each payday, some employers, particularly those employing for the first time, get a false impression of employment costs as they do not realise that there will be Tax and National Insurance Contributions to pay on top of the net wage.
Net, Gross and Total Cost: what's the difference?
The gross wage is the employee's net pay + Tax + Employee's National Insurance contributions.
In addition to the gross wage, employers have to pay Employer's National Insurance contributions; this is called the Total Cost. So the total cost is the gross pay + employer's NI.
Their gross weekly wage would be approximately £227* per week.
The employer's total cost would be approximately £240* per week (that's the gross wage plus employer's NI contributions).
(* Figures are rounded up or down to the nearest pound and assume a standard tax code for tax year 2011/2012).Protect Your Employment Costs
When you agree to pay a gross wage with your carer your total costs are protected, and you will not normally be affected by any changes in legislation, nor will you run the risk of getting lumbered with any unpaid tax from your carer's previous employment. But by agreeing a net pay you are essentially writing a blank cheque - committing to pay all your carer's tax and National Insurance contributions, irrespective of any changes in the legislation and without taking into account their individual tax code or tax position.
A net pay arrangement is equally unfavourable to your carer as they would not benefit from any increases in their personal tax-free allowance.