How do I model employee costs?

HMP employees

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There are many costs associated with having employees as a part of your company.  Just saying the words wages and benefits is saying a lot!

There are basically two kinds of employees, exempt and non-exempt.  When creating a financial plan, you can think “hourly” vs. “salary”.  There is a good definition of the difference between exempt and non-exempt on the Human Resources Blog that provides much more detail.  Other considerations from a pay standpoint include any overtime pay rates for hourly, bonuses you plan to pay.  You will also want to plan for any pay increases you plan to provide based on annual review or performance.

Benefits can include many items but at the most basic consider insurance such as medical, dental, vision, short and long term disability and life insurance.  It is best to get a couple quotes from reputable firms and use an average cost per month for planning purposes.

Finally, you will need to plan for workers compensation costs.  This cost varies by state and by type of employees so make sure you check with your state or accountant to better understand this cost.

There is a lot of complexity when it comes to fully understanding the cost surrounding employees.  Make sure you not only get multiple estimates for these costs but also have an experienced accountant or fellow business person review your assumptions.

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