As your business grows, there will come a time when you may decide you need some help. There are several ways to hire an employee such as under sub-contract, piecework, etc... However these tips deal with an actual “employee” and the costs associated with hiring someone. A great reference point that you can get many of your questions answered in detail is: The .
Taxes - You will be well advised to hire a good local Certified Public Accountant to help you set up your first employee. The reason I say “local” is that you will not only need to deal with State and Federal taxes when hiring someone, but local taxes as well.
Unemployment Insurance – You, as an employer, will also be responsible to pay for unemployment taxes/insurance. State law will determine how much you need to pay for unemployment insurance. Again, check with your CPA for the details in your location.
Worker’s Compensation - Worker’s Comp is insurance for your employees that will provide protection for them in the event that they are injured on the workplace and cannot perform their job. For clerical positions such as a secretary, Worker’s Comp is relatively inexpensive, usually a couple of hundred dollars a year. But for other occupations that involve a higher likelihood of injury, the rates go up. This is employer-paid. Meaning your business must pay 100% of the costs for Worker’s Compensation.
Training – The time it takes you to train an employee should be calculated when considering how much it will cost your business to hire someone. And don’t forget about turnover. If you take a month to train someone and then they leave, you will need to re-train someone else to do the job.
With all the things you will need to pay for the answer to the question: “How much will an employee cost my business?” is to count on at least 12% of the gross amount you pay your employee and can be upwards as high as around 25%. The only way to know for sure is to speak with a good CPA regarding tax issues and with your insurance agent about employer-paid workers comp insurance rates.
| 