What is the Actual Cost of Hiring an Employee?
Business owners tend to wear a plethora of hats in the course of running their business. Many times, there comes a point where they begin to consider hiring an employee to help with some of these tasks. If you are considering making a hire, here are a few things to consider before taking the leap.
In addition to paying a salary or hourly wage, employers are responsible for paying a portion of Social Security, Medicare, and federal and state unemployment taxes. These taxes are subject to wage limits and are paid periodically throughout the year. The penalties for not filing a 941 or 940 on time can be costly so you will most likely want to hire a reputable payroll tax company to take care of this.
If you are considering this, reach out to your tax advisor for advice on how to proceed.
In today’s market, you have to offer benefits such as paid time off, retirement contributions, and health insurance, to attract better employees. While these benefits can lead to better and more productive employees, they also are attached to a cost. In addition, there are costs associated with managing retirement accounts.
Finally, employers must consider the overhead costs associated with new hires. These can include:
- Office supplies
- Office furniture
- HR costs
- Payroll processing
- Insurance – workman’s comp, business, licensing
- Misc – cell phone, uniforms, etc.
With all of this in mind, an employee can easily cost 25-40% more that the salary or wage that they will make. It is important that you, the employer, have a good understanding of where you stand financially and what costs you can afford. In addition, there are tax considerations involved with some of these factors. If you are considering making a hire, consult your tax advisor. If you don’t have an advisor, please reach out to Elias Strauss CPAs and we would love to be a resource for you.