Whether a potential new hire is asking for a hefty starting salary or a current employee is inquiring about a raise, employers need to take stock of the big picture before offering increased pay.
Bankrolling your staff involves far more than simply paying their salaries, monitoring your online time clock for attendance, and running reports. And, while your budget might be flexible enough to cover the pay increase, there are a number of hidden costs that are too often overlooked. Read on to learn the hidden costs of your employees.
Employee Hidden Costs
FICA and Medicare
According to mandates from the Federal Insurance Contributions Act, 12.4 percent of earned income must be paid to social security. Furthermore, 2.9 percent must be paid to Medicare. As an employer, this means that out of every employee’s salary you are responsible for paying 6.2 percent to social security and 1.45 percent to Medicare.
Federal and State Unemployment
As of 2014, the Federal Unemployment tax rate is 6 percent. This applies to the first $7.000.00 employers pay each employee during the year. State employment tax rates vary from state to state.
Workers Compensation Insurance
Rates are determined by risk classifications of each industry but can run employers up to $3,000.00 a year per employee.
On average, employers paid each employee $11,000.00 a year in health insurance costs, depending on the industry.
Fringe benefits include everything from bonuses to the use of a company vehicle and run employers up to 9.1 percent of an employee’s salary.
All of us are looking to hire the best of the best. But, before we agree to a hefty salary, it’s vital to factor in all accompanying costs.