Insurances, Taxes & Benefit Costs
The most important factor pertaining to employment is the basic salary. You have to research your industry and see the minimum salary/wages that others are paying to their employees. Several resources are available online that help you check out what others are paying in the field. You can also consult various publications that offer a range of salaries in your business area.
Hiring an employee also brings in unemployment insurance, taxes, and other insurances. According to US Department of Labor, you have to keep the unemployment insurance tax provision if you paid wages equaling or more than $1,500 in any quarter of a calendar year or if you have hired at least one person during 20 weeks of a calendar year. Unemployment insurance taxes are currently 6.2 percent on a $7,000 salary. Other insurances include life insurance coverage (currently $150 for $50,000 salary), long term disability insurance ($250 on $50,000 salary), and health coverage (currently, $2K to $3K for singles and $6K to $7K for families).
Along with the basic salary, you also need to check out the Social Security and Medicare taxes. The Social Security taxes are stated at 6.2 percent on the first $90,000 of salary. Similarly, the Medicare comes around 1.45 percent of salary. Other than these taxes, the workmen’s compensation has to be taken care of: 0.3 percent of salary for clerical staff and 7.5 percent of salary for manufacturing staff. Keep in mind that as the employer, not only must you withhold and pay Social Security and Medicare taxes from each paycheck, you must match that contribution and pay what are called 941 employee taxes.
Finally, for in-house staff, you have to provide proper working space and facilities. The facilities may include computers and other machines – telephones, etc. With computers, you also need software. You may also be using a LAN so you have to think of those expenses too.
The above gives you a rough idea of how much money is needed to hire a first employee. The total costs include the basic salary plus approximately 1.75% of that basic salary (to cover insurances and other taxes/facilities and equipment).
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