Ask TaxMama.Com Tax Information With A Mother's Touch Published by Eva Rosenberg, MBA, EA Volume 6, Issue 258        May 14, 2004

TaxMama Resources An Inspirational Call ITIN So 1031 Exchanges Cost of an Employee Deposits as Income   2004 IRS & Treasury East Burden on Business Meal & Entertainment Expense Deductions   Just for Fun We Need Inspiration   E-Mail  This Page To A Friend Your email: Your name: TO email:

Cost of An Employee » From: Little Rock, AR Dear TaxMama, I am so glad I found your site!!! My question is: How do I figure how much it cost our business to have an employee? What portion of the taxes does the employer pay vs. the employee's portion? Is there a method to figuring this cost? Thank you. I await your reply. Shirley Dear Shirley, Figuring the true cost of an employee is so difficult. There are so many invisible components - like time to hire; time to train; time spent giving instructions on current tasks; time spent reviewing their work. ... Oh, you want the obvious, direct costs, right? Your (empoyer's) share of taxes: FICA/Medicare taxes - 7.65% FUTA - .08% Up to $7,000 in income per employee. State Unemployment - (You'll have to look it up.) (while you're there, ask them about any hiring incentives) Next, you'll have workers compensation insurance. The cost depends on your industry. If you give them sick pay and vacation, that's another cost. If you send them to training or classes, you're paying for the education and the time they are there. If you offer any benefits, figure those in. And then, after you look at all the costs - look at how much time a good, trained employee saves YOU. Or how much income they generate for you, if having them lets you take on additional work or sales. That's the best I can do without knowing much more about your business, your industry, and the type of employees you're hiring. Seriously, though, you really ought to sit down with a good, local Tax Pro to get specific guidance on the costs - and how to reduce them. There are SO many ways to cut those costs, or offset them with tax benefits. Generally, for a small business, offering only sick days and holidays, but not insurance or other benefits, you're probably safe adding about 25% of the wages to figure out your employee budget. Best wishes, Eva Rosenberg Your TaxMama

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