actual cost of an employee – it’s not the hourly wages!

I see a lot of people complain about their jobs and how they make shitty pay or they’re fired at a moment’s notice for small issues, and I’d like to take a moment to explain the actual cost of hiring and keeping an employee.

Let’s break it down, because it may surprise you to learn that
I’d have to pay $32.45 an hour for 1 employee who is making only $10 per hour.

First of all, we need to pay you at least minimum wage. Where I live that’s $10 an hour. But that’s only the beginning. I have a specialized retail business that requires more knowledge than the average cashier needs, so I can’t get away with paying less than $15 an hour, but for the purposes of this post, let’s say $10/hour.

Training takes my time and money, and if the employee doesn’t learn quickly, this can add up to hundreds of dollars in time and money just in the first few weeks. If there’s uniforms or vests or whatever, I pay no less than $7 per item, and that’s after I’ve paid the initial fee of $150 for the pattern.

Add to that the insurance, which is about $500 a month. The more employees I have, the less I pay, but remember I’m a small business and only hire 1-2 employees (not including the artists). This DOES NOT INCLUDE THEIR HEALTH INSURANCE. This is only to cover me if they get hurt or hurt others on the job.

Health insurance is (at the very least) $300 per month per employee. Add to that mistakes (dropping/breaking things) and/or theft and I’m out anywhere between $5 and $5000 in just the first week. The less an employee cares about their job, the more they’ll “accidentally” break things and goof off during work hours.

The loss of customers is a scary one! I have to trust the employee and just hope they’re going to be nice to customers. If not, my entire business could go under just because I have a shitty employee with a bad attitude. This is a loss in the hundreds of thousands of dollars.

Skimming is a big problem too. I had one employee who was skimming as much as $100 for every $300 they gave me. They only lasted two weeks in my shop, but there’s no way to tell until it’s already happening. Skimming ALWAYS happens. The only question is whether it’s a big or small amount they’re stealing from you.

If I see small issues, I need to fire immediately. You may not be doing anything REALLY bad, but I’ve been there done that and I can see the shitstorm coming a mile away. If I don’t get rid of you immediately, I’m out thousands of dollars.

Below I’m going to list an example breakdown for an employee. These costs are an average after having had both good and bad employees. And every person I’ve ever talked to says they don’t do these things, but somebody has to be lying because it happens more often than not.

Cost of One Employee for One Month:

  • $10/hour = $1600 per month
  • $100 per month in federal taxes for social security
  • $87 per month in state taxes for social security
  • $56 per month in worker’s compensation
  • $500 per month insurance
  • $100 per month in unemployment (even if the employee is working)
  • $300 per month for health insurance
  • $60 per month Medicare tax
  • $300 average loss due to breaking items per month
  • $500 average loss due to skimming
  • $480 per month for 3 “sick days” or the employee not showing up – this also wastes my time because I have to scramble for another employee and pay them double
  • BONUS EXPENSE: at least $1500 per month loss if an employee pisses off one of my guys and they quit (this has happened more than once)

So while you’re getting your $1600 in pay (and an extra $500 a month skimming/stealing/watching YouTube/playing games while you’re supposed to be working) each month and $19,200 per year, I’m shelling out about $5000 every month just for the privilege of having 1 employee.

Even if all goes well, I’m looking at about $31,300 per year just to employ 1 person. Worst case scenario, my entire business goes under because of 1 employee with a bad attitude who steals and skims me right out of business and turns all my customers against me.

I’m paying $32.45 an hour for an employee who is making $10 per hour. And I still have to cover when they take time off or they’re sick!

If I could pay an employee under the table, I’d love to pay them $25+/hour, but I can’t. I’d be leaving myself wide open to MANY problems, and employees don’t give a shit about their job performance until they get at least $15/hour. Cost goes up exponentially the more you pay an employee hourly. At $25/hour I’d be paying $60-$70 per hour.

All of this is skewed in favor of big business. Small and medium-sized businesses can’t hold a candle to big business – we don’t get tax breaks, discounts, or any help. Places like Walmart can even legally withhold their taxes from the government for “business improvement money.” This can be literally millions of dollars per year and they don’t even have to prove it was used to improve the business.

I also refuse to employ someone only 39 hours a week to get out of giving them healthcare because I think it’s a shitty practice, so all those fees above are part of what I have to do.

That being said, if you can’t afford to hire an employee, don’t hire an employee. They need living wages, and if employees are happy, there’s less chance they’ll screw you over. It still happens, but there’s less chance of it.

There are HUGE risks when employing people, and if you can’t handle that, you shouldn’t be hiring employees.