| One of the principal measures that will continue to | | | | and expenses per year. |
| stagnate our current economic troubles and slow any | | | | In this light, the costs of hiring new employees just |
| recovery is our high level of unemployment. | | | | might not seem worth it. But, employees also offer |
| High unemployment results in low levels of spending. | | | | other benefits. The goal of any business looking to add |
| People out of work just don't have the money to | | | | workers is that each worker should be able to bring |
| cover their necessary expanses as well as all their | | | | enough benefit to the business to cover their own |
| personal desires. This means that consumers become | | | | expense as well as provide a bit more to the |
| more selective about when and where they spend. | | | | company (in the form of profit). For example, a new |
| Good news for businesses that provide needed | | | | minimum wage employee may cost the business |
| products and services and not so good news for | | | | some $19,000 per year but, if that employee can either |
| businesses that only provide so called luxury items. | | | | save the company a similar amount or bring in new |
| If high unemployment is a major cause of our | | | | business that covers more than their costs, then it |
| continued economic problems then a simple solution is | | | | would be a viable and profitable objective in hiring that |
| to entice employers to hire more workers. Simple | | | | employee. This is based on the standard financial |
| enough but hiring new employees can be a two edge | | | | principals of Net Present Value (NPV). |
| sword. If consumer spending is already down it means | | | | Thus, when thinking about your business, its future |
| that business revenue is also down. With decreased | | | | growth potential and its hiring practices, the business |
| business revenue most entrepreneurs find it hard to | | | | owner should always consider more than just the |
| justify adding more costs to their payroll expenses. | | | | salary or wage of new employees. Business owners |
| Further, hiring a new employee consists of more than | | | | should treat employees like they would treat any other |
| just paying a salary or wage. | | | | investment project. And that is to determine what |
| Most employers are required to pay one-half of their | | | | added benefit the project (employee in this case) will |
| employee's Social Security Taxes as well as one-half | | | | bring to the table then subtract out the cost (all the |
| of their FICA (Medicare) taxes. This relates to a cost | | | | costs). If the net result is positive, then the project |
| to the employer of an additional 7.65% above and | | | | should be undertaken (or the employee should be |
| beyond the employee's salary. Not to mention the cost | | | | hired). |
| of federally mandated unemployment (usually around | | | | It seems that, especially in hard times, business owners |
| 6.2% as well as state unemployment taxes - usually | | | | fighting to survive tend to get caught up in the cost of |
| around 4%) as well as training, infrastructure (desks, | | | | doing business. And, employees usually represent the |
| computers, etc.) and other employee management | | | | business's largest area of costs. But, by taking the fear |
| costs. | | | | and emotion out and looking at both the benefits of |
| In fact, according to CNN Money - an average | | | | employees as well as their costs can make these |
| employee can cost as much as 25% to 30% above | | | | types of decisions easier and potentially more |
| their base rate of pay. Example, the average wage in | | | | profitable to all involved. |
| this country is approximately $63,000. For a new | | | | Or, think about this way. Your business hires a new |
| employee earning the country's average this could | | | | employee who takes their wages and spends them in |
| relate to additional payroll expenses of $15,750 per | | | | the local economy. The other businesses, which |
| new worker (above the salary). | | | | benefit from your employee's spending, see an |
| Now, what if your small business was not looking to | | | | increase in revenue and decide to hire their own |
| hire the average worker and was only seeking to pay | | | | employees; who in turn take their wages and spend |
| the minimum wage required? Even if your business is | | | | them in local, community businesses (like yours). As this |
| seeking to hire a new full-time employee at the | | | | go on, the local economy improves and, as the saying |
| minimum wage of $7.25 or $15,080 per year, this | | | | goes, a rising tide will lift all boats. |
| employee would cost $3,770 in added payroll taxes | | | | |