Are employees really 70% of employer costs? Do they really cost three times their pay?
A long time ago I read that employee costs are 70% of an employer's expenses and that they cost three times their salary to employ.
Now, assuming this is correct this must mean that employees salaries are about 23% of employer costs and the rest (46%) is costs which cannot be traced to any one employee (electricity and office rent for example).
Are these statistics correct?
If so why do employers lay off staff as soon as things get hard rather than trying to cut the other 46%? Have they been influenced by the statistics above and not thought things through?
Administrative overhead - 1 boss for 10 employees, so he makes 50% more to manage 10 people, equivalent cost = 15% of your pay to be supervised
Employment taxes like unemployment and matching Social Security contributions - 15%
HR department support, payroll timekeepers, the secretary for the department, your IT costs - 10% of your pay to be supervising/supporting you
If you have health benefits - 10%-15% of your pay, paid by employer
If you have paid vacation, sick leave, etc - 5-10% of your pay
So at a minimum, someone who earns $10 an hour costs around $14 to employ in taxes and overhead or 40%
Add in premium benefits, and it is around 65% or $16.50.
And these equations don't take into account tools the employer may have to provide, uniforms, safety equipment, etc.
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