And I am not referring to the actual time and cost of making your employees pay, but all those costs that are often not taken into account when a quote or proposal is provided to a client or not included in quotes and planning. financial.

The payroll cost burden includes all expenses incurred in excess of an employee’s salary. To arrive at an employee’s true cost per hour, you need to take this into account. The employer portion of FICA, Medicare, and state and federal unemployment taxes are common examples of payroll burden, however, there are others to include in your payroll costs.

Worker’s compensation and part of your general liability insurance premiums are based on wages paid. These rates vary from state to state as well as the job classification and these costs are part of your payroll load. You can find out the cost of the premium per dollar of wages paid through your insurance agent.

The cost of paid vacation, sick, personal, and vacation time must also be included in the cost of payroll. To do this, determine the number of paid days off an employee is entitled to and multiply it by the employee’s average daily wage. Then divide by the number of work days in a year (for example, 52 weeks minus 2 weeks of vacation equals 50 work weeks). And then divide by the average number of hours worked in a week, which results in an average cost per hour of paid time off. For example, an employee paid $800.00 for a 40-hour week with two weeks of paid vacation, 1 week of paid sick leave, and eight paid holidays. The computation would be: 10 vacation days + 5 sick days + 8 holidays = 23 paid non-working days. $800/5 days = $160 per day of wages paid. $160 x 23 non-business days = $3,680 (annual cost of non-business days). There are 260 possible business days in the year (52 x 5) minus the 23 non-business days = 237 business days. These 237 business days must be charged at the cost of the 23 paid non-business days. Divide the non-business day expense by the number of business days ($3,680/237) which is $15.53 per day. Divide the $15.53 by 8 hours and you have your hourly charge cost for paid days off. Depending on your company, you may have employees who work overtime or even less than 40 hours a week occasionally. Unless you think this may materially affect your load, you can base your figures on the “usual order of business”.

Other expenses to consider include company-paid medical, dental, and/or disability insurance premiums (net of employee contributions). And if you provide your employee with a vehicle, the cost of purchasing, financing and insuring that vehicle may be an expense to include. In addition, any other cost of employee benefits provided by the business must be considered as part of the payroll charge.

When all is said, the salary you pay your employee for a day’s work is only the beginning of the cost of that employee. Failing to determine the cost of your payroll load can reduce your bottom line earnings. And without profit we can’t stay in business.