Last updated: 30 March 2021

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. This factsheet will guide you through the process of drawing up a workable and affordable employer budget to suit your specific circumstances.

Contents

1. Preparing your employer budget

2. What should I include in my employer budget?

2.1. Introduction

2.2. Non-wage costs

2.3. Wage related expenses (‘on costs’)

2.4. Calculating how much you have for PA wages

1. Preparing your employer 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.
  • when you spend money from your DP it must relate to an agreed ‘outcome’ in your support plan.
  • carefully managing your budget allows you to ensure that your spending is affordable and sustainable.
  • 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.

To help you prepare your employer budget you may find it helpful to use:

Employer template 1.2a: Employer budget template

2. What should I include in my employer budget?

2.1 Introduction

Your employer budget must include:

*IMAGE*

This is the weekly value of your DP plus any assessed contribution that you make.

*IMAGE*

Outgoings will include:

‘Non –wage’ costs

For example, Employer’s Liability Insurance, Payroll Service, Recruitment, PA expenses etc.

Wage related expenses (‘on costs’)

These are the ‘invisible’ costs involved in employing PAs. For example, holiday pay, pensions and employer’s national insurance. You will need to save money for each of these things. You can do this by budgeting for 58.3 weeks rather than just 52 weeks.

Wages

All money left after budgeting for the costs above can be used to pay PA wages. The number of hours you can afford to employ your PA for depends on the wages you pay them. You must pay your PA at least the national minimum wage.

After all of this you may have a surplus.  Any use of surplus must be agreed by your social worker, social services department (SSD) or Continuing Health Care (CHC).

2.2 Non-wage costs

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

(a) 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: Insurance

(b) Payroll

You may choose to purchase a Payroll Service to manage the financial side of employing PAs for you. A Payroll Service will correspond with HM Revenue and Customs (HMRC) for PAYE purposes, calculate your PA’s wages every 4 weeks or monthly, comply with statutory 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

(c) 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.

(d) 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.

(e) PA expenses and mileage

Although you do not need to reimburse your PA for the cost of their travel to work you do need to reimburse them for travel costs that they incur while working for you e.g. driving you to the supermarket. Any use of funds must either be outlined in the support plan or will need to be agreed by your social worker, SSD or CHC.

2.3 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)
  • Pensions – 3% of PA earnings above £192.00 per week
  • Employer’s National Insurance Contributions (ENIC) - 13.8% of earnings above £170.00 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. Please contact your Social Worker if you think you need extra funding to pay pension contributions or for ENIC. 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.

(a) Holiday pay

Your PAs are legally entitled to 5.6 weeks paid holiday per year (including statutory 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.

(b) Pensions

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.

(c) National Insurance

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 2021/22 tax year this is 13.8% of earnings above £170.00 per week.

(d) Other Wage related expenses

If your employee earns above the Lower Earnings Limit (LEL) £120.00 per week in the tax year 2021/22 then they will be eligible for SSP and 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, SSD or CHC.

SMP is funded by the government and your payroll service will be able to claim this directly.

2.4  Calculating how much you have for PA wages

Once you have taken non wages costs and wage related costs into account, any monies left can be used for 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 2021/22 tax year this is £8.91 per hour for over 25 year olds.

Please contact your social worker or SSD if you need extra funding to meet this requirement. You can also contact Independent Lives for further budget support or queries.