What Is The True Cost Of Employing Staff?


Sources suggest that the full cost of employing someone is about 50% more than their actual salary. For someone on $40,000, the business may have to find over $60,000!

How can this be?

Details can be found at http://www.asmartbusiness.co.nz. Here's a summary table. Example:

Salary and Wage Rate $40,000 $55,000
Non Wage Costs (15.61%) $7,400 $8,586
Compliance Costs $632 $632
Office Costs $15,500 $15,500
Total Cost of Employing Office or Admin Staff $63,600 $79,716

 The obvious question is:

What are your systems to ensure you are getting a full return on this investment?

Costs of employing people include: recruitment, company insurances, employer taxes, ACC, Superannuation/KiwiSaver, training, infrastructure costs, consumables (tea, coffee, toilet paper etc), HR overheads, office set-up, software licenses, computer hardware, a proportion of fixed costs (rent, power etc), parental leave, jury service..........Not included in this list are items like the lost productivity while a person is learning, on sick or annual leave....the list goes on!

Other sources say it costs the average business $160-180 an hour to employ a middle to senior manager, when considering all this indirect costs.

According to the Labour Cost Index - Statistics New Zealand, non-wage costs add 15.61% over and above the cost of salaries or wages:

Each year Business New Zealand in conjunction with KPMG conduct a survey to establish the compliance costs businesses face. For businesses with less than 10 full time employees, compliance costs average $632 per employee per year.

Estimates of office costs per employee include: Desk, chair, filing cabinet, computer hardware, computer software, phone (initial cost), their share of the overheads (ongoing insurance, depreciation, power, phone, internet, and consumables like paper, toner, coffee and toilet paper), their workspace to occupy in your premises and share of common areas (ongoing rent and rates). This was worked out to be $15,500.

Instead of asking what employees really cost, ask: "What am I doing to ensure I get a full return on this investment?" Unless you have the plans in place for staff to add value to the business and to deliver more than what they consume, the business will forever under perform.

Cherri Holland



Cherri Holland has twenty years of successfully working with organizations.

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