Congratulations – your business has grown and you are ready to take on your first employee. You have a steady cash flow and your profit margins indicate you can afford to pay someone around $25 per hour to help you out.
Stop! $25 per hour could be more than it seems! Before employing someone you need to take into account all of the costs involved. You also need to look at the best way to employ them (full time or part-time permanent or casual or as a contractor.
Once you have the figure you need to analyse them against the expected productivity gains and the impact on your bottom line.
So the cost of taking on an employee is not just the wages. If you plan on having permanent staff additional costs include:
- Workers’ compensation insurance
- Annual leave, long service leave and leave loadings
- Sick leave
- Time and cost of training
- Time and cost of recruitment
- Workers compensation insurance
- Payroll Tax
These additional costs can add 25% to 40% to the basic wage. So your $25 can look more like $35!
You may also need to consider other factors such as the cost of protective clothing, tools, plant and equipment, and workstation, as well as the time required to supervise a new employee.
So make sure you look at the bigger picture before deciding when the business can afford to employ someone / someone additional.