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How much does an employee really cost?

Discussion in 'Business Operations' started by Tyler7692, Aug 23, 2010.

  1. Tyler7692

    Tyler7692 LawnSite Bronze Member
    Messages: 1,086

    I have one employee that is paid $11.00 per hour, soon to get a raise. How can I figure out how much he really costs me so I can bill a profitable hourly rate? After taxes, workers comp, wasted time, blah blah blah, what would he cost? $16.00 per hour? More? What kind of benefits could I provide for what cost (approx. of course!)
  2. ajslands

    ajslands LawnSite Silver Member
    Messages: 2,238

    I don't pay my guys for wasting time! Why should you. As for blah blah blah; I pay them for that. Other than that I have no insight to offer. But I got a good laugh out of it!
    Posted via Mobile Device
  3. Stillwater

    Stillwater LawnSite Platinum Member
    Messages: 4,889

    Its unlikely you could offer a traditional benefits package with 1 employee.

    But to figure what he is really costing you use this cost calc., I suggest sitting down while using it. When finished and you are sure you did not forget anything add your profit percentage you require to survive and grow as outlined in your business plan (not that easy) this figure is the minimum hourly rate you should charge. Your business tax man should also provide you with this info every year. checking numbers should be done often

  4. WheatBookkeeping

    WheatBookkeeping LawnSite Member
    Messages: 108

    If you don't need an exact dollar amount and you just need an idea of how much it cost.

    Here is a little trick I use to get a quick ballpark figure for the up-to-date cost of an employee.

    I call local temp agencies and get quotes from them for the type of worker I need.

    Get quotes from about five agencies then use the highest rate for your guestimation. They have the entire overhead worked into their bid, so it should be of some use to you.
  5. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Messages: 4,685

    Well I could go over the numbers of my one employee that hasn't screwed me this season. He makes a 17.25 an hours and works an average of 55 hours a week so with OT he averages 19.61 an hour. Then there is 6.8% unemployment insurance 4.5% workman's comp about 7.5% social security and medicare. And about 25 a week for a payroll service or another .46 an hour. so combine it all and I am coming up with 23.76 an hour on average. Not sure if that helps but I can not do your numbers cause you did not give your rates. Now as for wasted time we do not waste time but we do lose easily 15-25% a day to load time lunch time drive time that sorta thing. So 10 of those hours are not billable a week and that's if he doesn't work on mowers and blades or wash our fleet.
  6. bohiaa

    bohiaa LawnSite Fanatic
    Messages: 5,220

    Man O man isnt this the million dollar Question....

    you may want to turn it around and say how much does an employee MAKE me ?

    I have one guy that has been with me for a little over 3 years now and I couldn't do 1/2 of what I do with out him..
    After someone has been with you for a while he will know EVERYTHING. and he will MAKE you tons
  7. Dr.NewEarth

    Dr.NewEarth LawnSite Bronze Member
    Messages: 1,476

    The Planet "Landscape Industry Certified" managers course manual says,"the average cost of recruiting one employee is between 60 to 100 percent of the first year's salary, when you total the direct and indirect costs of the process."

    And then the big question..."an employee is a $30,000 to $40,000 per year asset
    that must be nurtured. Each year that asset increases in value another $40K. At the end of ten years, the company has a $400,000 working asset. What are we hiring for $40,000 annually , and how are we using this asset to help us make a profit?"

    Then it says, " it is interesting to note that many companies are probably devoting more time, effort and maintenance to their new $30K truck than they are to some employees."
  8. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Messages: 4,685

    I think id toss that book if I were you as much as you want them to stay they have a say in it as well. So why would you invest in an asset you have no ownership or control over. Further more your find most employees do not care about the work or the responsibilitys you have taken on to give them a job they just want their check. That book may work in some fields but it honestly doesn't in this one.

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