Top Factors To Calculate The Cost Of An Employee

Expanding into new markets is an exciting step to grow your business and tap into new talent pools. However, hiring global talent can get complicated, especially when it comes to understanding and managing employee costs. There’s much more to hiring a new employee than just their salary. If you don’t fully grasp the true cost of hiring in a new market, your expansion plans can fail before they’ve even begun.

Partnering with an EOR such as Playroll can help minimize your risk and cost when making international hires. In this guide, we’ll give you an accurate look at what the direct and hidden costs of employment are, so that you can make better strategic decisions when expanding your business into new markets. 

Key Considerations When Calculating Employment Costs

Direct employment costs

• Your employee’s base salary. 
• Statutory benefits which can include things like paid time off, workers' compensation insurance or social security – statutory benefits will differ by country.
• Non-mandatory benefits which can include things like retirement benefits or health benefits, for example – this also differs by country and employer.
• Employment taxes.

Indirect employment costs

• Recruitment costs, for example running advertisements for your open roles on job boards, paying recruitment agencies to help fulfill your roles, or paying referral bonuses.
• Establishing a legal entity in a new market, which will include legal fees and  local taxes.
• Overhead costs if you have an office in the country, which can include costs such as rent and office supplies.
• Onboarding costs, such as the time and resources spent to train a new employee and the associated loss of productivity during that time.
• Equipment costs, such as laptops and headphones and the costs of delivering it to a remote worker.
• Local payroll and HR costs.
• ‍Relocation cost, if you’re relocating your new employee to a specific location - this can involve all the costs in sponsoring a work visa and transportation allowances.

Get A Detailed Breakdown With Playroll’s Employee Cost Calculator

It shouldn't be a puzzle to get an accurate idea of the costs involved in global hiring. That’s why Playroll has launched a free employee cost calculator that leverages our team’s in-depth expertise in the local employment laws of 180+ countries. It gives you all the tools at your fingertips to calculate the direct cost of hiring in a new market, right now.

At a glance^, you’ll be able to:

• Get a breakdown of salary, employer taxes and statutory benefits.
• See the percentage difference between gross salary and the total cost to the employer.
• Get a side-by-side comparison of these costs in different countries, so you can decide which market suits your budget the best.
• Create a custom link of your calculations to share with anyone in your business.

‍Check out the calculator here.

Watch the walkthrough:

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Minimize Your Global Hiring Cost With Playroll

When hiring internationally through an Employer of Record (EOR) such as Playroll, you don’t have to pay the steep costs associated with opening your own entities. Although you pay a monthly fee for an EOR service, it’s cheaper than establishing your own entity – not to mention the time saved to launch operations in a new market. 

Depending on your hiring strategy, other hidden costs can also be written off, such as the overhead associated with a physical office and the cost of setting up local payroll. 

Playroll’s experts will take over the responsibility of employing and managing payroll for your new global team members, and ensure strict compliance with local employment laws, so that you can simply focus on growing your business.

Employee Cost FAQs

What Are Mandatory Benefits?

Mandatory Benefits refer to the minimum set of benefits that employers are legally required to provide to their employees, as dictated by local, regional, or national laws.

What is Gross Pay?

Gross Pay refers to the total amount of money an employee earns before any deductions are made. It includes wages, salaries, overtime pay, bonuses, and any other form of compensation.

What Are Non-Mandatory Benefits?

Non-mandatory benefits, also known as voluntary benefits or perks, are additional offerings provided by employers to employees beyond the legally required benefits such as healthcare and retirement plans.

How Do Costs Differ When Hiring A Contractor vs A Full-Time Employee?

As an employer, you’ll save costs when hiring contractors when it comes to employment taxes, training and resources such as equipment. However, contractors typically charge a higher hourly rate than full-time employees, to supplement the fact that they do not receive the same benefits as a full-time employee. 

Take this into account when deciding on the length of project time for a contractor. 

Playroll offers comprehensive contractor management at $35 USD/month per contractor, to manage and pay contractors compliantly, and minimize your risk of contractor misclassification. We can also help with converting contractors to full-time employees.

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