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The Real Cost of Employment page 2

The Real Cost of Employment page 2

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Employee-specific Costs

Employee-specific costs typically include the cost of the tools your employees will need to do their job - things like telephones, stationery, business cards, software licenses or email accounts, etcetera. Our example employee may require the following costs:

Desk and chair$400
Adobe Photoshop CS6 license$700
Webstorm HTML IDE license$99 / yr
Google Apps for Work (email)$5 / mo or $60 / yr
Phone handset and line$30 / mo or $360 / yr
Total Employee-specific costs$1619

Divide total employee-specific costs by our fictitious employee's income of 50,000 results in about 3.25% and our “loaded” rate keeps moving up, now at 31%.

Life Insurance? Pension? Christmas Party and/or Bonus? Group Outings?

Let’s be frugal and imagine that instead, we’ll attract and retain employees with an innovative and positive work environment - they’ll stay with us for the intangible benefits and not take it personally when they find out there are no christmas bonuses - we hope. Of course, this may be very different in your industry where there may be competition for the best and brightest and benefits become an important way to retain great staff.

Shared Office Costs

You might be inclined to think that since you are already paying for an office and expenses regardless that it should not be factored into our “loaded” rate. However, there are only so many employees you can cram into an office space before you have to lease another. Shared costs must be considered for a true valuation of employment costs:

Share of general overheadsrent, rates, building maintenance, water, heat & light, telephone, insurance, etc$750
Consumablesstationery, toner, tea/coffee, toilet paper, etc$150
Administrative overheadsHR, payroll, IT and nework infrastructure, secretarial, appraisals, etc$2,500
total shared office costs$3,400

Shared costs represent about 5% of the employee’s wage and our “loaded” rate grows to 36%.

Are you beginning to perspire? Brace yourself, there is so much more...

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