What Is the Cost for a Salary?


Quick Answer

The costs of hiring an employee are typically 1.25 to 1.4 times the base salary range, therefore, a salary of 50,000 a year will actually cost an employer 62,500 to 70,000. The cost for a salary is often much higher than the actual salary because the business not only has to pay for the basic salary, but also must pay for recruiting expenses, employment taxes, benefits, space and other equipment.

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Full Answer

To establish a base salary for an employee, an employer will first need to look at the expected ranges of the salary within the field or for the position that the employee will hold. This data can be found on annual Compensation Surveys in a publication within the employer's industry. For new startups, the starting wage of the employee should be close to those of the later employees so that any risk component for being an early hire will be "made up" in the equity compensation component.

Employment taxes will need to take into account workers' 's compensation premiums and also allow allowances for Social Security/FICA (Federal Insurance Contributions Act), unemployment/FUTA (Federal Unemployment Tax Act) and Medicare. There are also benefits to consider. Most employers cover life insurance and health insurance. However, other benefits could include long-term disability insurance, dental plans, dependent care assistance, tuition reimbursement and retirement plans.

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