Startups, as well as small and medium-sized businesses, that have hired anyone and paid them real money have quickly realized how much employees cost. If you have arrived at how much you have to pay someone to have them work for you, pencil in your budget that figure could be nearly double to keep them around. It hurts to have a real company that employees people, but thatâ€™s what itâ€™s like in the big leagues. Right?
While the bad news is that maintaining employees and keeping them long term is going to take more investment from you than just meeting payroll, you can save on employee retention. Itâ€™s usually the things you didnâ€™t factor in that eat up your employee budget. Weâ€™re not just talking about benefits either. There are real costs of being an employer. Getting granular about what itâ€™s costing you will help you decide where it makes sense to save as well.
Small Businesses Need To Consider The Cost Of HR Law Compliance
Itâ€™s one thing to have enough money to pay someone to work for you, but there are also things that you need to pay for, just for having them there. You canâ€™t pass everything you spend on employing someone onto the employee through payroll deductions. Workersâ€™ compensation insurance is one of those things. If behooves every startup, small business, SMB, whoever to make sure they are legally compliant when it comes to workersâ€™ compensation. You might not think that workersâ€™ compensation is what is on fire at your office right now, but if something happens, you are going to wish you took care of it.
Accidents on the job can happen in any work situation. Startups are no exception. A simple slip and fall could cause big trouble if you fail to be compliant in offering workersâ€™ compensation insurance. You have to consider what it costs to have the right insurance when you are budgeting for employees.
Unemployment insurance should also be included in how much employees cost. Unemployment is paid out of a fund from employers. You canâ€™t get around contributing to it. Having to let someone go from your company is inevitable. Being able to cover unemployment is a must.
In short, the unavoidable cost to you, the employer, is around $3600 per year for an employee making $30,000 per year. Just having 10 of those employees around will cost you a whole other full-time employee!
Donâ€™t Forget About Payroll Processing And Healthcare Costs
Once you are done getting your mind around the unavoidable extra expenses around how much employees cost, there are other things you are likely paying for like payroll processing. Weâ€™ll get to healthcare costs later.
If you are processing payroll correctly, you know it is not an easy task, particularly if it is not your field of expertise. There is plenty to be calculated besides the weekly pay. There are all of the state and federal taxes, Medicare; donâ€™t forget any wage garnishments an employee may have. Have you also factored in what payroll processing is costing your startup per employee? While payroll processing certainly does dispense with the payroll processing headaches, it is also an added factor in how much employees cost to have around. Payroll processing can cost you anywhere from around .10 per check to up to $9, depending on the level of service you sign up for. Donâ€™t forget the monthly service fees which vary greatly by provider and level of service offering.
Lastly, there are healthcare costs. For many startups and small businesses, they have either considered not offering it or are trying to figure out how to get around it. Both of those scenarios is a mistake. Why? When it costs so much to have an employee around, donâ€™t you want to keep them there? You can keep losing great people to employers who offer more, like health insurance, or you can find ways of being able to offer it without killing your business in the process.
A PEO Will Help You With All Of These Employee Costs
Have you considered a PEO before? Do you know what one is? A PEO is a great solution for startups because they pick up HR management where your hiring process leaves off. HR compliance is covered because a PEO is responsible for making sure you are. They offer workersâ€™ compensation, unemployment insurance, payroll processing, and payroll tax management, and of course, healthcare benefits. You can have all this for a lot less than you are paying for these services individually now.
If youâ€™d like to find out more about how a PEO would fit into your budget of how much employees cost to keep, weâ€™d love to help you. Contact us today for a free consultation.