The True Cost of Payroll
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When an employer is deciding to hire an employee, they must consider the true cost of payroll. Your employer must pay you more than your hourly rate or salaried rate. Business owners must determine if they can afford an employee. Business owners need help, and people need income, but what can your company afford to pay? The next question is what the employee can afford to earn. Many employees take a position below what they need because they need a job. Many business owners take a customer offer below what they need because they need a sale. However, in the end, there can be some resentment because of the struggle.
Let’s look at the true cost of payroll. Can you afford to hire an employee?
- Write out the job description. What are the services you need to be performed by the employee? How much is the standard salary for this type of positions? Can you afford to pay more? I ask can you afford to pay more because I want to allow others to earn more as well. Often an employer can pay more, but they sacrifice the employee for bigger profits. I look at it this way; if I want to be able to afford more or even afford to pay my current bills, I want that for someone else as well. I want to help people out of poverty.
- Once you determine your rate, what is the actual rate you want the employee to receive? If we determine we will pay the employee $33,280.00 a year that would include taxes and benefits. The employee would receive $26,416.00 a year. The employee will need to know if this is enough for them to live off in a year.
- The employer would pay an estimated $6,106.88 in payroll taxes in addition to the $33,280.00. Also, if the employer offers benefits that could be $5k plus annually.
Most small business owners don’t offer health insurance or benefits. Also, many have to offer a lower salary so they can cover payroll cost. Hiring an employee is possible, and you can pay fair wages when you calculate your labor cost into your pricing correctly and your business expenses you will earn enough to cover the true cost of payroll and still earn a profit.
Watch The Podcast Video Examples Below:
Small Business Accountant, Virtual Accountant, Payroll