Labor burden cost is important to compute and understand because it includes a variety of significant costs that are often viewed as company overhead, but are in fact, costs related to employment. Many businesses fail because they focus simply on payroll and payroll taxes, and neglect to consider the entire actual cost required to enable an employee to perform the work he or she was hired to do.
Fully burdened costs for individual employees can be expressed as a yearly total to provide an estimate of how much the company will spend that year on an employee. It can also be expressed as an hourly cost by dividing the total yearly cost by the number of hours the employee will work. This number is often 50% to 150% higher than the gross hourly wage. As costs are often used as the basis for pricing services or products, this is why it is so critical to obtain an in-depth understanding of the true cost of an employee.
Actually, I have an old "new employee, this is what you cost us" sheet a firm gave me a while ago when I worked for them. My salary then was ~$130k/yr
Here's their breakdown:
- 401(k) matching - (variable but the max was) $13k
- Medical - $17k
- Dental - $1k
- Life Insurance - $600
- Long Term Care Insurance - $200
- Social Security - $10k
- Leave - $10k
- Holidays - $5k
- Other benefits - $2700
total benefits: ~$60k
Add in administrative staff, facilities people, security, office space, gym, various other insurances, transit reimbursement, educational opportunities etc and that number easily hit $100k. So my personal burdened rate was about $230k/yr.
Some employees also simply cost more for various reasons and averaged even higher numbers across the board. I think one time I saw the figure and it was something like $260k/yr/employee and there was lots of distress over that being about $20k too high.
The flip side is that we charged out for around $300k-$600k/yr depending on the job.
Thanks for elaborating. I can see this making sense for a large Goog-esque type company with plush benefits.
But for a Series A startup "administrative staff, facilities people, security, office space, gym, various other insurances, transit reimbursement, educational opportunities" should be just "office space". 401k matching should also be 0, and probably dental too.
So I'm still not seeing anywhere close to 200k/employee for a startup.
Here's a guide that shows how a $150k/yr employee ends up costing a bit over $250k/yr.
http://research.unc.edu/offices/sponsored-research/policies-...
Here's WP's take on it
https://en.wikipedia.org/wiki/Labor_burden
Labor burden cost is important to compute and understand because it includes a variety of significant costs that are often viewed as company overhead, but are in fact, costs related to employment. Many businesses fail because they focus simply on payroll and payroll taxes, and neglect to consider the entire actual cost required to enable an employee to perform the work he or she was hired to do. Fully burdened costs for individual employees can be expressed as a yearly total to provide an estimate of how much the company will spend that year on an employee. It can also be expressed as an hourly cost by dividing the total yearly cost by the number of hours the employee will work. This number is often 50% to 150% higher than the gross hourly wage. As costs are often used as the basis for pricing services or products, this is why it is so critical to obtain an in-depth understanding of the true cost of an employee.
And some more http://www.sleeter.com/supplemental/articles/Labor_Burden_Gi...
edit
Actually, I have an old "new employee, this is what you cost us" sheet a firm gave me a while ago when I worked for them. My salary then was ~$130k/yr
Here's their breakdown:
- 401(k) matching - (variable but the max was) $13k
- Medical - $17k
- Dental - $1k
- Life Insurance - $600
- Long Term Care Insurance - $200
- Social Security - $10k
- Leave - $10k
- Holidays - $5k
- Other benefits - $2700
total benefits: ~$60k
Add in administrative staff, facilities people, security, office space, gym, various other insurances, transit reimbursement, educational opportunities etc and that number easily hit $100k. So my personal burdened rate was about $230k/yr.
Some employees also simply cost more for various reasons and averaged even higher numbers across the board. I think one time I saw the figure and it was something like $260k/yr/employee and there was lots of distress over that being about $20k too high.
The flip side is that we charged out for around $300k-$600k/yr depending on the job.