Let’s be real for a second—have you actually looked at the true cost of hiring an employee?
I recently had a conversation with a financial officer from a large company who proudly shared his calculation for the hourly cost of one of their employees:
- -Annual salary: $80,000
- -Divided by 52 weeks
- -Divided by 38 hours per week
Simple math, right? He came up with an hourly rate of $40.47. Not bad, right? Well, not quite.
When I asked if that’s the real cost of an employee, he confidently stuck to his $40.47 figure. This is the part where an HR consultant would start pulling their hair out. 😅
Here’s what he missed: the hidden costs that come with hiring an employee. Let’s break it down.
Explore the rising average training costs per employee across company sizes, highlighting the sharp increase from 2015 to 2024 for small, midsize, and large companies.
The True Cost of Hiring
Sure, there’s the base salary, but that’s just the beginning. Did you know that the actual cost of an $80,000 employee can end up being 1.4 times higher?
- -Superannuation: Add another 9%, which is at least $7,200.
- -Annual leave: You’re paying $80,000 for 48 weeks of work, not 52, so tack on $6,667 more.
- -Sick leave: Factor in about 10 sick days per year, which costs around $3,333.
- -Public holidays: 13 public holidays in Australia? That’s another $4,332.
- -Workers compensation: This varies, but let’s use 5%—that’s another $4,000.
- -Payroll tax: Depending on your state, this could be another $3,800 as your business grows.
- -Recruitment costs: Finding and training staff isn’t cheap—it typically costs around $5,000 upfront, which, spread over two years, is an annual cost of $2,500.
The Real Price Tag
After factoring in all of that, your $80,000 employee is now actually costing you about $111,833 a year. That’s $56.60 per hour—a bit more than the original $40.47, right? And we haven’t even mentioned the costs of ongoing training, office space, computers, or those extra cups of coffee.
What’s Next?
Now that you’ve got a better picture of the real cost of hiring, what will you do to manage non-performing employees and reduce turnover? These numbers matter, so it’s time to make sure you’re getting the most out of your team—and maybe consider some more cost-effective options, like Virtual Assistants, that don’t come with all the hidden expenses. 😉