How much do I cost my job as a new employee?
A lot of us are guilty of hopping jobs a few times in our early working days. Our hourly wages are the only major expense that we incur, right?
Well, no. You may be surprised to find out that there's so much more to employee cost than meets the eye.
Your employer pays a ton of costs on top of your wages to hire, train and maintain your employment.
So while it can sometimes seem like our wages are just too painfully low, there’s a lot of times that small businesses simply can’t afford to pay more. The total cost is simply too much. They’re saddled with a lot of expenses per hour for their employees that we don’t see in our pay stub.
Let’s take a look at some of the costs involved with hiring and keeping employees.
Before you ever step foot into your workplace, the onboarding overhead has begun. After all, the business owners have to pay the salaries of the human resources managers that hired you, the people that will train you, the staff that manages your payroll and the staff that will help ready your workspace. Many companies also cover expenses like workspace supplies, computers and uniforms.
So, you’ve started to work. Now the employer pays the salary that you agreed on when you were hired. You may notice that a portion of your salary is deducted for tax, social security, healthcare and health insurance purposes. It may appear that your employer pays you and you pay all the taxes, but that’s not the case.
Surprisingly, you only pay about half of the taxes that are deducted from your check. That means your employer picks up the other half of the tab. Your job is required to pay for federal unemployment tax, plus half of your Medicare and social security taxes.
That's only on a federal level too. There's likely state unemployment tax and various state and local taxes to worry about as well.
Employee benefit costs
Benefits for employees vary wildly from company to company and position to position. Many companies pay for a portion (or even all) of the employee’s healthcare. Other paid benefits, like sick leave, time off, health savings accounts, 401k matching programs or retirement plans and wellness programs are also billed to your employer. These don’t come cheap, but they’re a necessary cost to improve employee health, well-being, and attrition rates.
Your loaded rate
So, if you add all of the costs together and figure them into your hourly base salary rate, that creates your loaded rate. Since we don’t have access to those exact figures, it’s tough to know exactly what your loaded rate would be. But the loaded rate is what employers are actually paying to have you on the clock per hour. Some say that your loaded rate is actually about 40% more than your income. That’s crazy, right?
The cost of turnover
Look, we've all had jobs that were less than ideal. When we leave a job, especially if it’s shortly after being hired, the company has to go through the hiring process again. And we know the cost of an employee isn't cheap in time or money. Leaving means they have to pay for a job posting, the training, uniforms, supplies, payroll staff and everything else all over again to get the position ready for another new staff member. In fact, it’s estimated that the average cost a company pays to hire a new hourly staff member is about $1,500. Yikes!
So, the next time you take a look at your paycheck, remember that your employer is doing more for you than meets the eye.
If there’s one more thing to remember, it’s that when you’re on your next job search, think about the position you choose. If you have a gut instinct that the job may not be a good cultural or skill fit—don’t take it! If you end up having to quit soon after you’re hired, you’ll cost that employer a lot of extra time and money. Especially when you're dealing with small business owners, this can really hurt their business.
Be mindful of your salary and benefits, of course, but also remember to be considerate of the employer costs of the company that hired you.