An employee's true cost is more than their wage
Beyond wages or salary, employer costs typically include payroll taxes, workers' compensation insurance, any benefits offered, and often training time and materials during onboarding. Budgeting only for stated wages significantly underestimates true cost.
This guide is educational, not payroll or tax advice. Confirm your specific employer cost obligations (payroll taxes, insurance requirements) with a payroll professional or accountant before finalizing a hiring budget.
Calculate the full picture before hiring
Before extending an offer, estimate the fully loaded cost — wage/salary plus employer payroll taxes, any benefits, and a reasonable estimate for onboarding time and materials — not just the number you'll state in the offer.
Use a revenue target to check if it pencils out
Once you know the full cost, the Employee Revenue Target Calculator helps you determine the revenue that employee needs to generate to cover their cost plus a reasonable profit contribution to the business.
Be realistic about ramp-up time for a new hire — few employees generate their target revenue from day one. Factor a reasonable ramp-up period into your cash flow planning rather than expecting immediate full productivity.
Commission and booth rental change this calculation
If your staffing model is commission-based or booth rental rather than a fixed wage, your cost structure looks different — see our Commission Structure Considerations guide and Booth Rental vs. Commission Overview.
Frequently asked questions
Should I factor in the cost of my own time spent managing a new employee? It's a reasonable consideration, though harder to quantify precisely — at minimum, be aware that management time is a real, if less visible, cost of growing your team.
How do benefits affect the total cost calculation? Any benefits you offer (paid time off, health insurance contributions, etc.) should be added to your fully loaded cost estimate — these can be a meaningful percentage on top of base wages.