How Much Would An Employee Cost Your Business?
Posted On: 01/06/21 - 0

When it comes to running a business, business owners like you are faced with unlimited tasks everyday. Managing those jobs and accounting for every transaction can be carried out by the entrepreneur. But, as the company grows, you will at some point need staff if you want to continue that growth. You simply can’t do everything yourself.  That all important decision will need to be made eventually.  How much would an employee cost your business? Are you fully prepared to hire an employee? Did you know the cost of your employee does not end with their salary? There are costs you need to know before hiring a staff member.

What are Employment Costs and How Much Would an Employee Cost Your Business?

The employer has to provide wages or salaries to the employees with added benefits that can be covered by the profit your business makes. Let’s have a look at what you need to know before bringing on another staff member.

1.    Expenses on Recruitment

Rarely, does someone come to your door asking for a job, you have to let people know that you’re hiring. You will need to pay to advertise to fill for a newly created role within your business. Once you have hired a staff member, you’ll have to provide them with the necessary training.  This is an additional cost. In some cases,  it can take up to 6 months (or longer) before that new hire is up to speed and fully functional in their new role.

2.    Primary Salary

If you’re hiring a new employee you need to pay a competitive salary or wage. The compensation you provide is the motivation that will encourage them to come to the workplace with a positive attitude, and happily show up regularly. To create loyalty, do your research before hiring to find out what the industry standards are.  It is very important to be competitive in your industry. At the very least, the salary/wage should be based on years of relevant experience and education.

3.    Added Benefits

Apart from the basic salary, you should also consider offering extra benefits to your employees. Employee benefits usually include health benefits (dental/health/vision) for the employee and their family. If you are a larger business, you likely will consider additional benefits such as long-term disability insurance, dental plans, and tuition reimbursement.

Were you aware that employee costs to your business are considered a cost of doing business (expense)? Employment salaries are considered a business expense which means you do not pay tax on that revenue that is paid to employees.

For more information, call us for all of your business accounting services.

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