If you are thinking about starting a business that will employee someone else other than yourself, you need to be aware of the true hourly cost of having employees. Most employees think about what they get paid per hour, whether it is $8 or $80 per hour. They don’t realize that the true cost to their employer is more than the hourly rate that appears on their paycheck.

Earlier this year CNN Money ran an article about the hidden costs of paying employees.  There is so much more that goes into paying employees, above and beyond just their hourly rate, including:

• Taxes – Employees and companies split the cost of  Social Security and Medicare taxes. This means that the employer pays the employee their hourly wage, plus the companies share of taxes. Employers are fully responsible for unemployment insurance taxes.
• Benefits – Most companies have some form of benefits packages, such as vacation, health care, or even small perks such as free lunch once a week. These benefits usually comes straight out of the employers pockets, though the cost of small business health insurance plans are often shared.
• Training – Most companies have to train new employees. Until the employee is fully productive, there is a cost associated with doing so.
• Other costs – Every employee costs the company money for things such as administrative costs. Consider every expenditure before hiring people, so that you can have the appropriate budget.

Employees often times don’t realize that they cost their company considerably more per hour than the wage that they see. As a business owner, you need to have a system in place to track all of your expenses. For example, an online payroll service not only helps pay employees every payday, but it makes tracking employee expenses much easier than doing so by hand.

Hiring employees is an important process for most companies. Just make sure, as the business owner, that you go into the process with both eyes open and are aware what the true costs of hiring an employee is.