Running payroll is actually not that expensive – other than the cost of the labor itself. Here is a quick breakdown of the cost of hiring employees.
Running Payroll – Employment Taxes
The employer portion of payroll taxes is 7.65%. This includes the Social Security and Medicare Taxes in which the employee must pay on behalf of the employee.
Note that the employee has to pay the other half. This is added to your tax deposits, but it does not actually cost you out of pocket.
There is also state unemployment tax (now called “unemployment insurance in modern days because it sounds better). This tax typically ranges from 1% to 5%, depending on the situation.
Federal unemployment tax is another liability, but not one to consider as this amount is negligible.
In general you can figure you have to add about 10% in taxes to your labor cost planning. If you plan to pay someone $20 per hour, figure that it will cost you $22.
Running Payroll – Processing Fees
You must also hire someone to:
- Compute the payroll for you
- Make direct ACH bank deposits if you wish to pay your employees that way.
- Deposit taxes on a frequent basis
- File payroll tax returns (there are many of them due at different times)
- Keep track of the payroll bookeeping
The cost for this can be as little at $50/month or so if you do this yourself. Be careful hat you may see offers to start for less, but typically after a while the discounted price reverts to the “normal” price. You also have to pay extra per employee or per paycheck with most online services. That’s how nearly all online payroll companies tend to operate. I don’t recommend do-it-yourself payroll because I’ve seen the mess in payroll tax mistakes that this can make – and the super expensive costs to fix them.
If you hire a “mom and pop” accountant to handle all of this for you, you will pay anywhere form $100 to $200 per month, depending on the deal you get and how many employees you plan to hire.
Finally, you can get a service that actually hires the employees on your behalf. These seem to be cheap at first but when you read the fine print they can cost $200-$500 per month.
Insurance and Benefits Costs
One more cost to consider is insurance. Please do not hold me to these numbers – they are just meant to get you started for your planning.
Workers Compensation will cost you form $200 to $800 per year, per employee, depending on how dangerous the job might be.
Disability insurance is required in some states and typically runs about $150 to $300 per year per employee.
If you are required to (or choose to) get health insurance for your employees, this could cost form $250 to $700 per month per employee, depending on many factors. Some states that require health insurance for full time employees, like Hawaii, allow you to make the employee pay half of this.
If you think you might wan tot hire us to run your payroll, click here: Payroll Services.