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Do businesses know the true cost of an Employee?

Do businesses know the true cost of an Employee?

Do businesses know the true cost of an Employee?

Mar 11, 2019 | Posted by Admin | Business Advice, Updates |

Thinking about expanding or reducing your employees hours? There are many factors to consider.

The benefit of an employee is different for every employer so each one business should be attempting to quantify the benefits that the employee brings to the business.

On the cost side the hourly rate may be different from business to business however the additional costs or burden added by government programs is similar. Many businesses underestimate the true cost of their employees.

As the BC minimum wage rate is projected to rise to over $15 per hour by 2021 let us assume that the hourly rate you are paying your employee is $15 for this example, the employer is non-union with minimal benefits and payroll exceeding $500,000 per year but less than $1.5 million.


The government programs/requirements include additional cost amounts amounts including Canada Pension Plan (5.1%), Employment Insurance (2.27%), Vacation Pay (minimum of 4%), Statutory Pay ((approx. 4%) , Worksafe BC(average 1.55%) and in BC the new Employer Health Tax (2.925%). This totals additional employer costs of 19.84%.

That employee that you originally thought was going to cost you $15 per hour is actually costing you approximately $17.97 per hour. A 20% difference.

Small employers will have a slightly lower burden due to exemptions from the Employer Health Tax whereas a larger employer will have a higher burden due to the elimination of exemptions from the EHT.

This provides a look at the minimum of additional costs for employees. Individual benefits paid by employers may make the amount even higher.

Moral of the story? When determining the cost side of employees do not underestimate. Assume that the additional costs will be, at a minimum, 20% over and above the hourly pay rate.




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About Admin

The partners in Connect Live CPAs, Denise Barber & Colin Haime believe in providing timely, quality service with a personal touch. Focusing on a web based approach and with 30 years of tax, accounting and advisory experience, Connect Live CPAs can serve all your tax and accounting needs.

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