William Chops Westfield wrote:
>> A good rule of thumb is that the total compensation cost and directly
>> related expenses for an employee is 15% above what is actually
>> paid to the employee.
>
> Really?  FICA by itself is 6+ percent,

Actually it's more like 7.5%.

> and there's the employer side
> contributions to medicare, disability, medical, dental, and life
> insurance.

But only the medicare is mandatory.  I wasn't counting benefits, only the
pure overhead on top of what the employee gets paid that isn't optional.
The other 5% or so after FICA and medicare comes from workers comp insurance
and mostly other insurance costs that are proportional to payroll.

> Then there's vacation/sick leave (5 weeks out of 52 is
> almost
> 10 percent by itself),

Not for hourly workers.  And 5 weeks is a lot, especially for low end jobs.
The typcial is 10 holidays (2 weeks) and another 2 weeks of vacation.
Again, this isn't relevent for hourly workers.

> retirement benefits (if any),

Again, optional.

> and overhead costs (HR, payroll,  etc)

As I said before, these were not included in the 15% figure, although small
companies don't really have much HR expense.

> I thought we used 50% as a guideline.  Or maybe it was $50k/employee?

That sounds much more like the fully burdened cost.

I think you misunderstand the 15% figure.  This is the additional overhead
that is directly proportional to pay that the employer can't really do
anything about.  In other words, if I'm thinking of hiring you for
100K/year, I immediately think 115K/year cost.  Then I add on other things
that might or might not apply, like medical insurance, special equipment you
might need, additional space I may need to rent, additional load on
management, etc.  That second figure is often termed the "fully burdened"
cost.  That's the figure I keep in mind as my break even rate if I charge
out your time.


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