How Much Does a New Employee Cost?

Written by chris miksen
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Good employees are a must for a business to thrive, but just how much do new employees cost? That answer depends a lot on the business you run, but hiring a new employee to replace an old one will cost you far less than if you hire a new employee to add to your workforce. Adding new employees to your already existing workforce means that your business is taking on additional salary, training costs and any new equipment costs.

Salary Costs

The first step in determining how much a new employee costs is how much the employee earns. If you are paying the employee per hour, rather than salary, then you can figure out how much the employee is going to cost you by multiplying his hourly rate by 40 hours and then multiplying that total by 4 1/3 to get the approximate monthly total. Multiply the monthly total by 12 to get an estimate of how much the employee is going to cost.

Training Costs

The new employee is going to need training, and the length of the training period depends on what kind of job is involved. Training someone to work in a pizza shop might take a week, but training someone at a software development company might take up to a month before the employee shows signs of working without any help. The training period costs depend on how you train your employee. You'll have to pay upfront costs for a training program, but if you train the employee yourself, or have another employee train him, then you'll have no upfront costs. You will still essentially lose money until the employee is fully trained and can begin earning his paycheck by completing his duties.

Equipment Costs

If you are in the restaurant business or another business that doesn't provide employees with phones, computers and desks, then equipment costs aren't applicable. If you provide your employee with these items, then you're going to factor it in to your overall cost. If a phone costs £19, a new desk costs £65 and a computer £520, then you're already almost up to an extra £650 for the new employee. If you are hiring the employee to replace one who is leaving, then you shouldn't need to buy these items.

Additional Costs

Keep in mind the hidden costs of a new employee as well, such as any benefits offered, uniforms issued, medical exams and potential bonuses. You can make the employee pay for some costs, such as uniforms, but any bonuses come straight out of your businesses' pocket.

Final Costs

The final costs of a new employee depend completely upon the business you run and the kind of employee you hire. For example, if you hire a new employee in a marketing position for £26,000 per year, provide him with £650 of equipment, front the training costs of £650 and pay £1,300 a year in benefits, then the new employee would cost £28,600. If you hire an employee to work in a pizza shop at £5 per hour or £9,984 a year, plus £13 in uniform costs, then the new employee would cost £9,997.

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