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I'm hoping that those of you who are business owners can help me with something.
Is there established rule of thumb for calculating the cost per hour of paying an employee? Just to get a rough estimate. For example, if you are paying someone $15/hr, approximately how much more would it cost you for expenses like social security, workman's comp, etc. Not including benefits. I know it varies and I am talking about a low risk injury type of job.
Is there established rule of thumb... Not including benefits.
I know it varies and I am talking about a low risk injury type of job.
10-15% should cover the basics.
The real costs though are in efficiencies.
Out of the basic 2080 annual hours you are paying them for...
how many will be spent doing something actually productive or even profitable?
Once you figure that out you'll never complain about employer taxes again.
10-15% is unrealistically low. There is SS matching, unemployment ins., but that is just the beginning. Training and getting an employee up to speed takes time and money, you have to factor in a percentage of "fails" where the employee turns out to be incompetent or a thief or lazy or all of the above. If you are going from zero employees to one, there is the additional cost and time in setting up and following reporting and payroll. You might get down to 15% with a large staff and low turnover, but for a first employee I would factor a 20 hour loss at the wage to start, and then 30% and hope that it went down. Underestimating costs is one of the worst things a business owner can possibly do.
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Quote:
Originally Posted by harry chickpea
10-15% is unrealistically low. There is SS matching, unemployment ins., but that is just the beginning. Training and getting an employee up to speed takes time and money, you have to factor in a percentage of "fails" where the employee turns out to be incompetent or a thief or lazy or all of the above. If you are going from zero employees to one, there is the additional cost and time in setting up and following reporting and payroll. You might get down to 15% with a large staff and low turnover, but for a first employee I would factor a 20 hour loss at the wage to start, and then 30% and hope that it went down. Underestimating costs is one of the worst things a business owner can possibly do.
I agree. When I had a business with 2-4 employees, and it was always 15-20% without medical, ouside training, paid vacation or sick leave even for part-timers. Add those and you can be up to 40%. In my current job as a manager I budget 35% additional for benefits and related non-salary costs. This does not include the cost of working more hours yourself or paying someone overtime when someone is off sick.
Although the other information is useful, the 15-20% is what I was looking for. Just the basics of what is required by law. 20% seems like a good number?
I would say 25-35%. Maybe even as high as 40% depending on what bennies you offer. When I had my shop my guys hourly cost was about 50 bucks field and 30 for office. The employees were paid about 25-35 for field guys and office were 12-25 depending on job descriptions.
Just what is required by law. I know there are other expenses, but I only want to know what is required for the employer to pay based on salary on non-overtime work in a relatively safe workplace. No benefits, no overtime, no training. I know those other expenses must be considered for any employer before they budget for employees and I am not trying to ignore of belittle its importance, but that's not the information that I need.
Is 20% a reasonable percent above their regular salary for government requirements?
SS/FICA, Unemployment (rates vary) and Workmans Comp (rates vary)
For the basics (absent other information not presented) 20% is an UPPER limit to budget.
10-15% really should do it.
Depends on the kind of employee you're hiring. If mean if you're hiring hamburger flippers, yes. If you're hiring professionals, it's an entirely different ball game:
Matching FICA
Unemployment
Workman's Comp
Vacation
Health insurance
Matching 401(k)
Then there are the other costs that don't necessarily show up on a W2, but are costs nonetheless:
Square footage
Computers and supplies
Training
And the list goes on
The amount you are legally required to pay is 7.65% of the employee's pay. That is the matching amount for social security and Medicare.
Everything else is optional and up to you if you want to take the risk.
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