The Cost of being an Employer?

This week I received an email question from a fellow networker.

"I’m doing a business plan thinking about labour costs and I wondered if there  is a rough way to estimate employer costs PAYE & NI on an hourly rate e.g. an extra 20% of the hourly rate paid?
To keep round numbers, say I wanted to pay someone £10 per hour – what would the other costs I would have to pay be related to being an employer? …or is is not that straightforward!?"

It's not quite that straightforward because it never is when HMRC and the Government are involved and this was my reply.

First of all, the costs are calculated on a weekly, monthly or annual salary. So let's do it on a weekly and you can multiply by 52 to give you an annual figure.

National Insurance. 
If the weekly salary is below £139.00 then there are no N.I. costs to you or the employee.
The employer pays NI on all earnings once the salary reaches £136.00 per week and this is at 13.8%
Between £139.01 and up to £817.00 per week, the employee has NI at 12% .
For anything earned over £817.00 the NI the employee pays is reduced to 2%

* For earnings between £102.00 and £139.00 per week, although no contributions are made, employees are still credited for pension purposes by HMRC. This is another good reason why a payroll should be run for the employee and records submitted to HMRC at year end.

Tax. 
This is worked out on annual figures.
Earnings up to £35,000.00 per annum employee pays 20% tax
(Because of the hourly rate quoted in the question, I didn't think the rates for higher earnings would be required so didn't include these)

One other thing you may want to factor in is the onset of the Pensions Reform where it will be compulsory for employers to contribute to their employees pension. This won't actually affect you until 2014 but is something you will need to be aware of. The cost of this is set to start at 1% rising to 3% over a period of 5 years. A big blow to small employers and one they need to budget for.