Understanding the True Cost of Employees
Do you know how much it really costs to hire, pay and otherwise support your employees? It’s much more than their base salary — and you’ll need to know how much revenue you must bring in to support payroll.
For starters, product-based businesses like retailers and manufacturers can expect to spend between 15 and 30 percent of their gross revenue on staffing costs, while service-based businesses can expect to spend between 30 and 50 percent on employees.
We’ll dig into the details below, but here are the areas you’ll need to consider:
- Hiring and training: Costs to advertise, interview, hire, train and manage new staff members
- Benefits: Costs to provide employee benefits like health insurance, retirement contributions and vacation
- Hidden expenses: Costs to provide equipment, office space, utilities and other essential overhead
- Incentives: Costs to provide bonuses and commission or work-related perks like a company car or cell phone
- Taxes and insurance: Costs for payroll tax and various employee insurance requirements
Taken together, all these costs can add between 20 and 50 percent to your base salary figures.