The REAL Cost of Employees

[GrassRoots Lawn Care]

I have worked with my partner since I started in the industry. Soon we are each going solo and I will be hiring a full time year-round employee. I know that there are additional expenses besides the hourly rate to which you pay the employee (ie. payroll, payroll taxes, increased liability insurance, worker's comp., unemployment). What is a safe estimate in figuring the REAL hourly cost of the employee? In other words if you are paying him/her $x/hr., do you figure 5%, 10% 20% in addition? I'm only interested in fixed costs, NOT including benefits (I'll add that seperately) and NOT intangables like increase wear and tear on equipment and destruction on customer's landscaping while the employee is being trained. If this makes any sense (I'm starting to confuse myself), I appreciate any advice you can lend on the matter.

[mowing king]

a common labor burden cost is 36%.

$10 per hr add $3.60 for addtional cost in s.s.,insurance comp,liabil,etc.

another cost is indirect labor ,or the time your paying him but no production is occured

[HOMER]

Pay him a salary. This way the amount shouldn't change and you could figure it like a fixed cost. If it rains do maintenance and send him home, if you need to work 10 hrs the next day then he's already made his money off the rain day.

[Greenkeepers]

I like the salary idea! Pay him/her based on an 8 hour day everyday.. You can also throw an overtime clause in there just to show that they will be rewarded for an extra long day. Salaried is the only way that you're going to have true fixed costs.

[awm]

I like the salary idea IF IM THE EMPLOYER.
As long as you have an large volume of
work .I might want an extended downtime
pre understanding or such.That way if
you are struggling for some reason,instead
of termination he knows an adjustment
will be temporary.I personally learned
to avoid salaried positions as my time
was never my own.

[GrassRoots Lawn Care]

Thanks for the replies. I will be paying an hourly rate and am looking for a formula much like mower king gave. Thanks mower king. In figuring my own formulas, I came up with 17%, mower king says 36%. WOW! Wasn't planning on that. Is 36% in line with what the rest of you guys pay? At 36% I don't see how I can make an employee profitable for me doing lawn maintenance with 85% residential accounts.

[Kent Lawns]

7.65% FICA
2-10% State Unemployment
1.2% Federal Unemployment
1.96-9.0% Workers Compensation
+ Payroll administration & filing

[GrassRoots Lawn Care]

This is one thing I had not worked into my plans this year. Should have asked around more. Bummer. So, does 36% sound like a good estimate to everyone here, according to your experiences?

[Rex Mann]

When I prepare my budgets I figure in 36% also. Believe me, it seems high. But if you under budget you are only hurting yourself and your firm.

I figure the following for my labor burden, fancy name for all the "stuff" the government makes us pay.

Fica
Social Security
Federal unemployment
State unemployment
Medicaid
Workers compensation, varies depending on your companies history of claims and the state you operate within.

Some of these you only have to pay on the first $7500.00 of each employees payroll. However, most entry level people never even stay around for that long. Therefore, I don not use the $7500.00 as a cutoff. I would rather be high than low.

Rex