Calculations and disclaimer

An overhead absorption rate — the standing costs and salaried wages of a business divided by the hours it can actually bill — and a minimum price for a job built from that rate, the labour and materials entered, the mark-ups the business has set, and VAT where it applies.

Every one of those inputs is supplied by the practice or the business. ProfitM8 does the arithmetic; it does not audit the figures it is given.

ProfitM8 applies the statutory employer's contribution rates and thresholds for the country recorded against each business, and shows which figures it used on screen. It is as close as the information allows, and it is still an estimate. These are the things that most often move the answer:

• Contributions are assessed per pay period, not per year. Employer's NI is worked out on each week's or month's pay, so somebody whose hours swing about can pay more over a year than an annual calculation suggests. ProfitM8 annualises to keep pricing stable, which is right for a price and approximate for a payroll.
• Contribution letters and reliefs vary by person. Under-21s, apprentices under 25, veterans, freeport and investment-zone employees and people over pension age are all charged differently. ProfitM8 applies the standard rate unless a different one is entered against that person.
• Thresholds work differently in different jurisdictions. In the UK and the Isle of Man the threshold is an allowance and only pay above it is charged. In Guernsey it is a trigger: once earnings reach the lower limit, contributions are due on everything up to the upper limit. ProfitM8 models each correctly, but the business's country must be right on its record.
• Reliefs we don't claim on anyone's behalf. Employment Allowance is only included when the business says it claims it, and the eligibility rules — connected companies, public-sector work, the single-director test — are not checked by ProfitM8.
• Rates change, and mid-year changes aren't back-dated here. Figures are reviewed each year and are stated on screen with the year they apply to. A rate changed part way through a year is applied from when ProfitM8 is updated, not retrospectively.
• The overhead rate is only as good as the hours. Chargeable hours are the single biggest lever on the overhead rate. Optimistic hours produce a low rate and under-priced work; the figures are an estimate of a business's own estimates.

A business can override the rate and threshold on its own set-up, and a different rate can be set against an individual. Where a business is in a country ProfitM8 holds no figures for, nothing is assumed at all — the on-cost must be entered.

Reviewed at the start of each tax year. The year each figure applies to is shown beside it throughout the app.

Prices, quotes and invoices produced with ProfitM8 are issued by the business, in its own name, to its own customers. The business and its practice are responsible for what they send and for the figures behind it.

To the extent permitted by law, ProfitM8 accepts no liability for decisions taken on the basis of its output, including work priced below cost, tax or National Insurance under- or over-stated, or thresholds missed. Where a figure looks wrong, it usually is — tell us, and check it with the practice before relying on it.