The Real Cost of Hiring Your First Employee (And What to Consider Before You Do It)
Hiring your first full-time employee is a major step for any small business owner. It often signals growth, momentum, and the need for more support—but it also comes with a price tag that many new entrepreneurs underestimate.
You might think, “I can afford a $50,000 salary,” but the actual cost of hiring a full-time employee is closer to $65,000–$75,000+ per year when you factor in taxes, benefits, tools, and training. Let’s break it down.
What Does It Actually Cost to Hire?
Here’s what goes into that number:
Base Salary: $50,000/year
Payroll Taxes (7.65%): $3,825 (Social Security + Medicare)
Benefits (Health, PTO, Retirement): $4,000–$10,000/year depending on what you offer
Tools & Equipment: $500–$2,000 to start, plus $50–$300/month ongoing
Hiring & Onboarding: Time spent recruiting, interviewing, and training—easily worth $1,000–$4,000
So even a “simple” hire adds up quickly. And that doesn’t include the time you’ll spend managing, coaching, or filling gaps during onboarding.
What to Consider Before You Hire
Before you commit to a full-time hire, ask yourself:
Can I afford this person for at least 12 months, even if revenue dips?
Is this a revenue-generating role (sales, client delivery) or a support role (admin, ops)?
Do I have systems in place so they can work independently, or will I be micromanaging?
Have I maximized automation, contractors, or part-time help first?
If you answered "no" to any of those, it may be wise to hold off or reassess your strategy.
Why Bookkeeping Matters in Hiring
Accurate bookkeeping helps you see the full picture. You’ll know your cash flow, track labor costs, and forecast whether your business can truly support another salary.
Before hiring, review your profit margins and expense trends—not just your revenue. This clarity helps you avoid overextending your business.
FAQ: Hiring Your First Employee
Q: How much should I budget for my first full-time employee?
A: Plan for 1.25x to 1.4x their salary. For a $50K role, expect $65K–$75K total cost.
Q: Can I write off employee expenses on my taxes?
A: Yes! Payroll, benefits, and work-related tools are deductible business expenses.
Q: What tools help manage employee payroll?
A: Gusto, QuickBooks Payroll, and ADP are great options for small business payroll management.
Thinking about your first hire? Make sure your numbers are in order. Let’s start Doing Business Right!
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