Date: 1st July 2015
Do you know the actual cost of employing someone in your business? It’s not just their hourly rate or annual salary. You will need to factor in the cost of ACC levies, Kiwisaver employee contributions, Fringe Benefit Tax, insurance, recruitment fees, as well as overheads. An employee who you pay $20/hour in your construction business, might actually cost your business close to $55,000 per annum!
We do not want to scare you away from employing staff, but it’s better to be prepared and know what you’re in for. That way, if you’re a service based business, you can accurately calculate your charge out rates. So we would like to introduce you to a handy Employee Cost Calculator on the business.govt.nz website that will help you accurately budget for your costs.
Let’s take a look at an example: a labourer paid $20/hour in a painting business. The Employee Cost Calculator will do the maths on the fixed costs, those are essential costs such as ACC levies and Kiwisaver employer contributions, that you generally don’t have control over.
Then it will show you other ‘discretionary’ costs that you may incur, such as recruitment fees and employee benefits. These are the costs that you have more control over. It’s easy to forget about training costs and setup but there’s a lot to consider here, for example, safety equipment and tools, uniforms and un-billable time taken to train a new employee.
If you’re ready to give it a go yourself, click here to go to the Employee Cost Calculator.
If you would like help with calculating employee costs or working out your charge out rate, please contact us.