The Hidden Costs of Hiring

Jay Kimelmanentrepreneur, Small Business, Tax, Uncategorized

Ready to hire that 1st employee? Expand your workforce? Keep in mind there are costs you will pay beyond the hourly wage!

OK, so your business is growing, you have budgeted $400 a week to pay your new employee. ($10 per hour for 40 hours.) You write that 1st paycheck for $400 and voila, you are now an employer.

Keep in mind, that is not all……there are at least 3 other costs you must consider.

TAXES

You have a number of taxes that must be dealt with. At the employee level, you have Federal Income tax or FIT withholding. This is calculated from the gross pay using the information obtained from the employees W-4. Then you have Social Security (6.2%) and Medicare ( 1.45%). These taxes are paid by both the employer and employee. Social Security is calculated up to the 1st $117,000 (2014) in gross wages. You also have unemployment insurance. This is paid by the employer at both the federal and state levels. In Florida, this has been renamed re-employment and an RT-6 must be filed.

BENEFITS

This is the wildcard right now. With the enactment of the Affordable Care Act (ACA), healthcare benefit costs are rising. We suggest you seek the advice of a skilled professional with knowledge of health insurance. Other benefits available for the employer to provide include: life insurance, supplemental insurance (like AFLAC), paid time off and sick benefits

TRAINING

This can be a huge cost to any organization. You should set up a training program for your company and ensure it is structured and organized. Employees are only productive if they know what to do and what is expected. Poor training leads to turnover, which leads to a constant search and subsequent training of new employees. Set your employees up to succeed, train them right the first time.

Other costs associated with employees result from not knowing the rules and requirements. We suggest you outsource your payroll functions to ensure your employees are paid timely and you are kept compliant with payroll tax deposits and filings.