How many years experience does your accountant have as a landscape/ maintenance contractor ?
His advice seems very basic to me. If i priced up my work based on these figures then i'd still be in the same position i was years ago.
Stuart @ Eco Garden Maintenance said:
When i asked my accountant about becoming an employer he said that i needed to charge an employee out at 3 times their wage. Makes it hard to pay a decent wage.
Paul - I think you have also missed the point of the charge out rate - Out of that rate, Insurance, Tools, Van fuel, Repairs, and business taxes all have to be deducted. From say £15per hour for a one-man business - there would be between £4-£7 left for each hour for the person working at that rate, charging out at that rate. That is stupidly low to live on! Especially when the business owner has to do 10-20 hours a week of unpaid extra work - Think Quoting, doing the accounts, servicing tools... this all has to be done at the end of a days paid work in customers Gardens.
An employee does not have to shoulder any of these costs! They get paid for doing the work you give them to do - and then go home. They do not stay for 3 hours after work without pay (and rightly so), helpping you quote, drive out to potential clients to see the garden and give a quote, Chasing invoices etc.
If I calculated my hourly rate including all the "after hours" work I did, I would feel sick - I know it would be well below £5per hour at the moment. My Girlfriend constantly reminds me I need a break and am costing myself, when I rarely finish quoting or servicing tools or chasing payments till 8-8:30.
My accountant ran this point by me: For every £1 you pay an employee you will have direct costs of their employment of about £1.80 such as NI, liability insurance and holiday pay. Further add in the risk of sick pay and this can vary from £2-£3 per £1 paid (remember we have to pay Stat sick pay). On top of that having an extra person using tools means a doubling of wear and tear on them, so lifespan may be reduced to say 4 years per strimer from 5-6. This adds another 20-30p per hour once all tools are covered.
With minimum wage now £6.08 (Posts above are 4 years old note), that means to break even paying minimum wage, you realistically need to be charging anything from £12per hour at the lowest (without using tools) to £18 once all other associated costs are covered. If your not charing more than this, what is the point of employing someone?