Are you thinking of hiring your first employee? Find out the real cost to your business before you agree on a salary.
For 2015 the following are an expense to your business on top of the gross salary:
FEDERAL EMPLOYER TAXES
| Social security (FICA)* | 6.20% |
| Medicare (FICA) | 1.45% |
| Federal Unemployment Tax (FUTA)** | 6% |
CALIFORNIA STATE EMPLOYER TAXES
| Unemployment Insurance (UI)** | 3.40% |
| Employee Training Tax (ETT)** | 0.10% |
* The Social Security portion of FICA is capped at $118,500 per year for 2015
** FUTA, UI and ETT are all capped at $7,000 per year for 2015
BENEFITS
In addition to employer taxes there are some benefits that you need to consider. Since July 1st of this year employees working in California for 30 or more days within a year, are entitled to paid sick leave.
Under California law you are under no obligation to provide vacation or holidays, however if this is expected in your industry this is likely to be required in order to attract and retain the best staff. Health benefits are optional as well for small businesses up to 50 employees, but tax brakes may be available. The Small Business Health Options Program (SHOP) Marketplace helps small businesses provide health coverage to their employees. In California you can use Covered California to get a quotation for your business.
WORKERS COMPENSATION
Lastly there is the additional cost of the Workers Compensation Insurance which any business, regardless of entity, has to provide even if they only have one employee. The cost varies depending on the industry and type of job and is linked to the employees’ wages. For an office worker earning approximately $80K this could be between $800-$1,000 per year and it increases for workers with a higher risk of getting injured while on the job.
If you need help getting your payroll set up or if you would like to learn more about how to manage your employees’ time and performance, please feel free to get in touch. We would love to help you expand your business!
