If the reason of having an employee in house is so that you can keep track and make sure they do their work, doesn’t this defeats the purpose of the “self-starter, independent” qualities you noted on your job ad? We have way too many things to do and more important matters to take care than babysitting an employee 🙂 In my ten years of doing bookkeeping for business owners, I find myself answering questions like why did QuickBooks took $2,532 more from their checking account when the employees’ salaries are only at $7,800 per pay period? I’ve summarized below just the basic costs of having someone on payroll. You would be surprise how significantly higher it is than the hourly rate you agreed upon on their employment offer letter.

  1. Social Security Tax – this is the tax employers pay to help fund the social security benefits at about 6.2%
  2. Medicare Tax – funds employer pay to help fund our medicare program at about 1.45% or employees pay. Additional 0.9% if your paying your employee over $200,000 a year.
  3. Federal Unemployment Tax Act (FUTA) –  Funds benefit payments for unemployed workers. For 2017, the FUTA rate is 6 percent of the first $7,000 of employee wages.
  4. State Unemployment Tax – Employers may be subject to a state unemployment tax. Tax rates and policies vary by state. Luckily, employers can take a credit for the state unemployment tax they pay against the FUTA tax. The maximum credit is currently 5.4 percent.
  5. Worker’s Compensation Insurance – About $1.85 per $100 of payroll or 1.85% of employees salary. It is much higher in California; up to 3.5%
  6. Mandatory Paid Sick Days – Most businesses I ran in to offer 3 paid sick days.
  7. Equipment they need to get their job done – for your new bookkeeper, you’ll need to buy her a computer, software subscriptions, calculators and other miscellaneous office supplies.
  8. Paid Time Off
  9. Medical Insurance
  10. Dental Insurance
  11. Life Insurance

Here I will summarize the cost of having Joe in house working as an accountant with annual salary of $72,000. Every employer is paying an additional $10,283.52 per year without benefits or cost of new equipment needed like computer and software licenses for the new accountant. 😉

Monthly Salary $6,000 Monthly Salary $6,000
Social Security $372 Social Security $372
Medicare Tax $87 Medicare Tax $87
FUTA $4.80 FUTA $4.80
SUI $204 SUI $204
Worker’s Compensation $120 Worker’s Compensation $120
Sick Days (Mandatory) $69.16 Sick Days (Mandatory) $69.16
Total Monthly (without benefits) $6,856.96 Paid Time Off $230.76 (2 weeks PTO/year)
Total Yearly (without benefits) $82,283.52 Medical/Dental/Life Insurance** $200
Total Monthly (with benefits) $7,287.72
Total Yearly (with basic benefits) $87,452.64
**In the state of California, the minimum contribution amount that employer needs to pay for health benefits is 50% of the premium. A healthy 35 year old accountant without dependent is costing about $400 in premium. This can vary but I am taking my own quote. I am 36, female non smoker in zip code 92029.

If you are a small business with sales below 2 million, you are better off hiring someone like me to get the job done and save yourself $63,452.64. Schedule a call with me today and let’s get it done.

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