Preparing your employer budget

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    Introduction

    Once your support plan is complete and you have planned how you will spend your direct payment (DP) you will need an employer budget to make sure that your planned costs are affordable and sustainable Independent Lives can support you to draw up a budget and discuss any queries with you.


    Considerations when preparing and using your budget

    There are several things to consider when preparing your budget and spending your DP:

    • you must stay within your planned budget and make sure that your invoices (‘bills’) are paid in full and on time
    • your spending must link to an outcome in your support plan
    • following your planned budget will ensure you do not overspend by accident
    • you should check regularly that your budget is still an accurate reflection of how you are spending your DP
    • if you are paying an assessed contribution you must continue to pay this into your DP account, or you will be short of funds

    What should I include in my employer budget?

    All money coming into the DP account

    This will be the weekly amount of your DP.

    If you have been assessed to pay a contribution towards your care, your total weekly DP amount will be made up of this contribution and is topped up by West Sussex.

    All money coming out of the DP account

    This includes all non-wage costs and wage related expenses.

    Non-wage costs

    There are many different types of non-wage costs for DP employers. Some of the most common non-wage costs are:

    Employer’s Liability Insurance

    All employers in the UK must have Employer’s Liability Insurance and so you must budget for this. This insurance will provide compensation and costs if any of your PAs injure themselves or somebody else whilst working for you. You may also wish to budget for other types of insurance including Public Liability Insurance- although this is not essential.

    For more information on insurance please see factsheet 1.3 Employer’s Liability Insurance.

    Payroll

    There are a range of payroll options you can choose from. If you choose to use payroll service, you will need to budget the weekly cost for this. A Payroll Service will correspond with HM Revenue and Customs (HMRC), calculate your PA’s wages, comply with legal requirements including statutory sick pay, maternity pay and student loans and provide pay slips and summary information for you to pay your PAs and HMRC.

    For more information on Payroll options please see factsheet 1.4 Payroll Options.

    PA expenses and mileage

    If your PA commutes to and from work this cost should not be included in your budget. If they use their car during their paid hours of work, you should include the cost of reimbursement into your budget. Other expenses to consider might include public transport costs. If expenses and/or mileage are not outlined in your support plan; you should seek agreement from your social worker, social services, or continuing healthcare (CHC) first.

    PA training costs

    Your PAs may require specific training before they can work for you. If this is the case, and it is agreed in your support plan, you must budget for these training costs. If it not in your agreed support plan, then you should agree this with your social worker, SSD or CHC.

    Recruitment costs

    It can be expensive to recruit a new PA and you may have to do so at short notice. As such it is useful to put some money aside each week to plan for this, but you should get this agreed with your social worker, SSD or CHC before using your funds for recruitment.

    Wage related expenses (‘on costs’)

    It is essential that you leave money aside for:

    • Holiday pay – 6.3 weeks at normal hourly rate (includes 0.7 for cover)

    Your PAs are legally entitled to 5.6 weeks paid holiday per year (including bank holidays). When you first start employing PAs you will not have a large surplus in your DP account and therefore, we recommend that you state in the PA’s employment contract that no paid holiday can be taken in the first three months of employment.

    • Pensions – 3% of PA earnings above £192.00 per week

    Some of the cost of the pension will be deducted from the employees’ wages, but the employer will also have to pay towards the pension if an employee earns more than £120 per week or if an employee is automatically enrolled or chooses to join a pension scheme, the minimum percentage of wages that must be paid into a pension scheme is 8%, 3% from employer contributions and 5% employee contributions.

    • Employer’s National Insurance Contributions (ENIC) – 13.8% of earnings above £170.00 per week

    PAYE (Pay as You Earn) is the system that HMRC use to collect income tax and national insurance from your PA’s wages. These are deducted automatically and therefore you do not need to budget for these costs. However, you must budget for Employer’s National Insurance Contributions (ENIC) if your PA earns over the threshold.

    For the tax year 2022/23 tax year this is 13.8% of earnings above £175.00 per week. In order to cover these costs, you will need to budget for 58.3 weeks of employment per year instead of 52 weeks. The additional 6.3 weeks is made up of 5.6 weeks for the PA’s paid holiday and 0.7 for holiday cover.

    If you have a larger DP package you may need to budget for more than this; please speak to an Independent Lives Adviser for more information.

    Other wage related expenses

    If your employee earns above the Lower Earnings Limit (LEL) £120.00 per week in the tax year 2022/23 then they will be eligible for statutory sick pay (SSP) and statutory maternity pay (SMP).SSP may be paid through any surplus you may have accumulated. Where there is not enough in your account you should contact your social worker, social services or CHC. SMP is funded by the government and your payroll service will be able to claim this directly.

    Calculating how much you have for PA wages

    Your support plan may already outline how many hours of support are available. How much you have in your budget will determine your PA’s hourly wage, but you must pay the PA at least the national minimum wage.

    For the 2022/23 tax year this is £9.50 per hour for 23-year old’s and over. After all of this you may have a surplus. Any use of surplus must be agreed by your social worker, social services or CHC.

    Please contact your social worker, social services or CHC if you think you may need extra funding to cover your employment costs. You can also contact Independent Lives for further budget support or queries.

    Last updated:  17th November, 2022