Fully Loaded Cost Of Minimum Wage Employee: £>20,000

[Guest]

Annual salary of a minimum wage employee (£7.20 per hour):

£14,688

(calculation method, minimum wage figures)

Fully loaded* cost of said employee:

£20,142

(spreadsheet, I have wiped most things to 0 because most variables depend on the business so the true figure is likely to be higher than this)

* The total cost of employing someone, includes things like building costs, software, equipment, consumables, national insurance and annual leave entitlement

---

A minimum wage employee has to generate in excess of £20,142 in annual revenue to be worth hiring.

Given that minimum wage work is found in high volume, labour intensive such as retail and service work like parcel delivery, how can some companies honestly produce this much revenue (and generate the economic output to pay a pension and healthcare) without being huge?

Our situation is bonkers, where jobs that would be worth doing, are simply excluded from existing because of unnecessary bureaucracy and artificial overhead.

I hate zero hour contracts because they transfer all risk to the employee with no compensation. (I believe) the reason zero hour contracts exist is because it is too expensive to hire employees.

One group have all the perks including stable employment, holidays, a decent salary, pension and training. Another group have no rights, stability and incur all the risk.

Is the true minimum wage £0?

I feel like we need a new construct that offers more granularity between zero hour contracts and full time employment with all the perks that includes. So you can pick and choose the perks of your employment where each perk has a value that is unique to the employee and unique to the employer, a bit like the schemes where you can buy and sell holidays.

To make things even crazier, we have tax credits to subsidize cheap employers but overcompensates and as a result changes the behaviour of the poor to become dependent and to remain underemployed.

Do we need to move the provision of perks from employers to elsewhere? So everybody can have them?

I think the solution thus far has been to fallback to money creation but money creation that goes directly to people and sidestepping business investment seems like a losing proposition. Free stuff is the enemy of effort (see welfare state and perverse incentive)

Should we really be punishing those with decent jobs to compensate the people at the bottom of the pile?

Do we just need fewer people? Do we simply need more things for people to do that are high value and profitable?

Edited September 6, 2016 by phantominvestor

[Sandwiches33]

Good points

"Should we really be punishing those with decent jobs to compensate the people at the bottom of the pile?"

Well this is something I think about, its easy when people rant about fat cat bonuses to think just seize all that but the reality is if you work really really hard and earn a bonus you pretty much lose half of it. This makes all your efforts in terms of unpaid overtime and such worth less than minimum wage. I am not talking about bankers I am talking just decent jobs that pay more than average. Im not driven by money but at the momen#nt half my labours are just taken from me and handed to someone not working as hard as me.

This makes me think to work half as much and not try especially when that money is handed to someone sitting in a mortgage free house.

[ChewingGrass]

2 x part timers at 18-20 hrs a week each is significantly cheaper than 1 x full timer.

[ARIMA]

2 x part timers at 18-20 hrs a week each is significantly cheaper than 1 x full timer.

Tax credits and the fact that some people e.g. Working mums will take lower wages in return for PT hours?

[porca misèria]

"Should we really be punishing those with decent jobs to compensate the people at the bottom of the pile?"

Core question of the squeezed midden.

[Richmond]

Good points

"Should we really be punishing those with decent jobs to compensate the people at the bottom of the pile?"

Well this is something I think about, its easy when people rant about fat cat bonuses to think just seize all that but the reality is if you work really really hard and earn a bonus you pretty much lose half of it. This makes all your efforts in terms of unpaid overtime and such worth less than minimum wage. I am not talking about bankers I am talking just decent jobs that pay more than average. Im not driven by money but at the momen#nt half my labours are just taken from me and handed to someone not working as hard as me.

This makes me think to work half as much and not try especially when that money is handed to someone sitting in a mortgage free house.

But if you didn't hand over the money then maybe they wouldn't be able to buy the things they do and your well paid job wouldn't be so well paid (or maybe wouldn't exist).

I also wonder if getting you to work half as much is part of the plan. Two people doing half the work of one is better for employment numbers. One highly paid person probably does less for the economy 'short' term than two OK paid people as two OK paid people will buy twice as many staples, two houses, two cars etc, rather than one very expensive car, one very expensive house, large savings......

[kzb]

There's been economic growth so this money exists somewhere. I think I am coming round to the citizens' income. A baseline income to cover necessities paid to everyone, but you work for the extras.

Something like this is inevitable as more and more jobs are replaced by technology. Otherwise the 1% are going to carry on running off with all the money and the new (and increasingly large) "useless class" are left in poverty.

[SillyBilly]

Comes back to the central theme that the cost of shelter is the major issue, not wages. If you didn't have such ridiculous prices (affecting both OOs in mortgages and renters in passed on costs) then people could work for less with the largest monthly expense reduced.

£20k does sound a lot but equally £14k is not exactly a lot to live on in either (ignoring TC's etc. - they should not be modelled into private sector pay).

Edited September 8, 2016 by SillyBilly

[Unbowed]

One thing to note though, is the distorting effect of the NI threshold. Business likes part-timers who help them minimise their Employer NI costs. This in turn encourages the part-time topped up with benefits culture.

The benefits culture also means those who have worked, paid off their house debt & put a little aside for a rainy day, can't then downshift, as they will be undercut by those whos council tax etc is paid for them. A case of once you work for the man, you'll be lucky if you can ever stop.

A strict ceiling on Housing benefit is needed, until then the Govt. will continue to act as an insurance guarantee for the BTL Ponzi.

Real market forces are needed. Only then will house prices adjust to what people actually get paid.

[porca misèria]

£20k does sound a lot but equally £14k is not exactly a lot to live on in either (ignoring TC's etc. - they should not be modelled into private sector pay).

Speaking as someone who is now on minimum wage, I can say it's a lot better than I've been on for much of my life. Rent is a big chunk of it, but gets me a house that would've been a HMO for 7 people (and a better one than I lived in) for the same proportion of my graduate income in 1983. And tax has all-but disappeared due to the rapid rise of the threshold.

[stuckin2up2down]

£20k does sound a lot but equally £14k is not exactly a lot to live on in either (ignoring TC's etc. - they should not be modelled into private sector pay).

I'm managing to live on 8k a year, with no housing costs and I have a very good lifestyle IMO and more holidays than most people I know that work full time.

But obviously this wouldn't be possible if I had kids.

No way am I going to ever pay income tax again while state pension, publicly funded final salary pensions, tax credits and housing benefit exist.

[PopGun]

Annual salary of a minimum wage employee (£7.20 per hour):

£14,688

(calculation method, minimum wage figures)

Fully loaded* cost of said employee:

£20,142

(spreadsheet, I have wiped most things to 0 because most variables depend on the business so the true figure is likely to be higher than this)

* The total cost of employing someone, includes things like building costs, software, equipment, consumables, national insurance and annual leave entitlement

---

A minimum wage employee has to generate in excess of £20,142 in annual revenue to be worth hiring.

Given that minimum wage work is found in high volume, labour intensive such as retail and service work like parcel delivery, how can some companies honestly produce this much revenue (and generate the economic output to pay a pension and healthcare) without being huge?

Our situation is bonkers, where jobs that would be worth doing, are simply excluded from existing because of unnecessary bureaucracy and artificial overhead.

I hate zero hour contracts because they transfer all risk to the employee with no compensation. (I believe) the reason zero hour contracts exist is because it is too expensive to hire employees.

One group have all the perks including stable employment, holidays, a decent salary, pension and training. Another group have no rights, stability and incur all the risk.

Is the true minimum wage £0?

I feel like we need a new construct that offers more granularity between zero hour contracts and full time employment with all the perks that includes. So you can pick and choose the perks of your employment where each perk has a value that is unique to the employee and unique to the employer, a bit like the schemes where you can buy and sell holidays.

To make things even crazier, we have tax credits to subsidize cheap employers but overcompensates and as a result changes the behaviour of the poor to become dependent and to remain underemployed.

Do we need to move the provision of perks from employers to elsewhere? So everybody can have them?

I think the solution thus far has been to fallback to money creation but money creation that goes directly to people and sidestepping business investment seems like a losing proposition. Free stuff is the enemy of effort (see welfare state and perverse incentive)

Should we really be punishing those with decent jobs to compensate the people at the bottom of the pile?

Do we just need fewer people? Do we simply need more things for people to do that are high value and profitable?

As already mentioned, for NI alone, part timers would be cheaper and deliver a similar output between them (in crude generalising terms).

Also the business lease/commercial rent is a major factor. In fact it's been this that's put me off doing something more than the cost of employment. In theory an employee delivers output in return. Where's a commercial landlord literally gets money for doing nothing. As I am unable to afford my own premises never mind a house I find this too resentful.