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Partner and I have gotten to the point where there will be too much workload for just the two of us, so we are bringing in some help. We will be paying our first employee 8.00/hr. My question to everyone is how much will the employee actually cost me per hour over his 8.00/hr wage? I will be figuring workmens compensation outside of this. I would just like to know what percentage over that 8.00 will taxes be. I suppose I could be easier about it an assume that I will be paying him 10.00/hr for easy math :)

Todd
 

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Todd,

Besides the hourly rate, you will need to figure for workers compensation as you mentioned, plus the company share of social security, state unemployment and federal unemployment. Whatever the rates are for your area is what needs to be figured. Hope this helps out!
 

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Terracare:

Each state differs, based on state unemployment taxes and W/C insurance. I'll give you ours to see if it helps you calculate yours.

FICA & FICA-M matching combined 7.65%
Fed unemployment FUTA 00.8% of 1st 8,000
TX unemployment SUTA 2.70% of 1st 9,000
W/C insurance 9.41%

Total 20.56%

Our W/C is high since we are just over 2 years in the business. Once the loss history is established, this should go down.

Hope this helps.

Tom
 

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Don't forget to add in a percentage for nonproductive time. You will always end up paying for more hours than are chargeable to the work. The goal is to keep that number as low as possible, but you will always have some of it. Also will you have any overtime, if so you have to add a percentage for the overall markup to account for any markup, and then before you set customers billing rate, you have to markup the labor rate for overhead recovery, and then add whatever percentage of profit you want to make on top of that.

I just finished our calculations for this coming year. A $9.50 per hour employee has a breakeven rate of 26.50, and I still have to add profit to that.

Doug
Austreim landscaping
 

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++++Our W/C is high since we are just over 2 years in the business. Once the loss history is established, this should go down.++++

But as soon as you get to the point that you're realizing savings on W/C insurance, assuming you have no injuries, I would count on you're unemployment insurance going up. How many threads have we seen re: What are you doing in the winter to stay busy? You'll be laying your employees off in the winter and they'll be eligible for unemployment benefits. The maximum unemployment tax rate in Texas is 8.4% this year, I believe. That's on the first $9,000 paid to any one employee. After that, there is no unemployment tax. At $9.00 per hour, an employee with 50 hours per week would have to work 18 weeks to get to that point. Our mowing season is about 32 weeks here in Texas. Of course, if you have any turnover at all, expect to pay the 8.4% on all wages.

I'm planning on payinig the maximum on unemployment.

According to my math, a $9.00 per hour employee who works 10 hours of overtime each week will cost $12.42 per hour. After he's been paid $9,000 in the year, the cost would drop to $11.66 per hour. If he's single and has no children, he'll take home an average of $7.95 per hour with 50 hours per week.

++++A $9.50 per hour employee has a breakeven rate of 26.50, and I still have to add profit to that++++

I can't imagine how you're coming up with that. Do you provide a lot of benefits, like health, life and disability insurance? Are you providing free day care to employees or something?

Later,
DFW Area Landscaper
 

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Dont forget about downtime. I think employees cost 18 percent extra from their wage. But what about the hour in the morning that they are loading up the trucks and the half hour they spend driving to the job or picking up mulch and such. Not to mention the drive back to the shop and unloading all the tools and parking the trucks. I hate to even say it buy I am betting in a 10 hour day we have at least 1-2 hours where the guys are not on the jobs getting work done but are getting paid. So remember they are costing you money during that time.
 

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You missed the part about picking up the share of overhead. You calculate the cost of your budgeted overhead ( Insurance, rent, repairs, office property insurance etc. and divide that by your budgeted labor costs. For us that's about 70%. In establishing prices in a contracting business, that is the most overlooked item, overhead recovery. Those are the expenses that go on day after day, whether you work or not, holidays, sundays rainy days etc.

Fail to recover your overhead and you fail.

We haven't worked to speak of since December 1, other than a few thousand dollars of snow removal. I still pay telephone, utilities, rent, insurance office wages, and on and on.

It is real easy to think that adding that one more employee will be a big profit boost, but as you grow, the overhead goes up fast, in fact hiring the first employee is usually the point of the fastest increase in overhead that will occurr in the overall history of any company.

Doug
Austreim Landscaping
 
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