Cost of hiring
A new hire costs more than their salary and is paid for out of the margin on sales, not the whole sale. Work out the real cost of the hire and how much more you need to sell to cover it.
What a new hire really costs and how much you need to sell
Enter the gross salary, the employer's costs, other costs of the hire and your contribution margin. The calculator gives you the real annual and monthly cost and the extra sales you need to cover it; if you enter your average price, also the number of orders.
Example: a 30,000 salary with 30% employer costs and 3,000 of other costs comes to 42,000 a year (3,500 a month). With a 40% contribution margin, you need to sell 105,000 more a year, about 8,750 a month. With an average price of 150, that is 59 more orders a month.
How it is calculated
- Annual cost = gross salary × (1 + employer costs) + other costs.
- Sales needed = annual cost ÷ contribution margin.
- Orders per month = monthly sales needed ÷ average price, rounded up.
Assumptions
- You enter the employer's social costs: they depend on the country, the contract and the salary.
- Extra sales have the same margin as your current ones.
- Does not include ramp-up time or recruitment costs unless you add them under other costs.
Frequently asked questions
How much does an employee cost a business?
More than their gross salary: add the employer's social contributions and other costs such as equipment, training or software. In the example, a 30,000 salary costs 42,000 a year.
Which employer cost percentage should I use?
It depends on the country, the type of contract and the salary. The 30% in the example is only illustrative: check the exact cost for your case with your accountant.
Why are the sales needed so much higher than the cost?
Because each sale has its own variable costs and only the contribution margin is left to pay for the hire. At a 40% margin, every unit of cost needs 2.50 in sales.
What if the person does not sell directly?
Then think about what they save or make possible: more customers served, fewer hours of your own, fewer mistakes. The calculation tells you how much they need to contribute, one way or another, to pay for themselves.
Does it account for the time before they are fully productive?
Not directly. If they will not be fully productive in the first months, add that cost under “Other annual costs” or expect more extra sales once they are up to speed.