Macro of deductions on a paycheck.What if I told you that your $40,000 salary employee may be easily costing you $15,000+ extra?  If you don’t already know how much your employees cost, it’s about time you do the math – not to scare you, but rather to help you budget and make informed decisions.  Here are some apparent and not so clearly defined costs that come along with an employee:

Salary and Benefits

Salary is an obvious cost, but things you may not have initially factored in are health care expenses, vacation and sick time, and 401(k) costs.  Just as importantly, you have to include the costs of administering those programs, which are often “written-off” as fixed costs.  They’re not, and you need to manage these service expenses just like you would your cabinet cost multiplier.

Tip:  Take the time to evaluate payroll service costs, including bundled full HR providers, for ways to lower this often hidden expense.  Be sure to evaluate these costs on a per employee or per payroll dollar basis.  Also, look at your payroll frequency for ways to save money on processing fees.


When mapping out your employee costs, don’t forget to include all employment taxes that apply – federal, state and local taxes as well as Social Security/FICA, Medicare and unemployment taxes.   Another area that varies depending on job title is worker’s compensation.  This may add a significant chunk to your total, especially if the employee is working in the field or wood shop, as these positions are more hazardous.

Tip:  Carefully check every employee’s workers compensation classification at each renewal.  In many cases, employees can correctly be classified in multiple categories – make sure your carrier has yours at the ones with the lowest rates.


Your employees will need everything from desks, chairs, computers and coffee to general supplies.  Add in the cost of a company phone, vehicle for in-home measurments, or anything similar that applies.  Some of this equipment may already be paid for, but if your dealership is growing, you’ll have to add these onto your expense list.  Also, remember to include the cost of repairs and maintenance.

Tip:  Include an allowance in your employee cost calculations for equipment you own.  For example, even though the van your service tech is driving is paid for, you should include a standard monthly amount in your employee cost calculation to get a more accurate picture of what their true cost is.

Software licenses

You need to factor in the cost of the software your employees use at work.  Much of the software you have today came with a high initial cost and may also include annual maintenance fees as well.  As with your equipment, be certain to allocate software costs to your employees, even if you have already paid for the programs in full.  This is also a perfect time to evaluate cloud-based software with subscription pricing.  It’s a great way to avoid big up-front costs for new software that can help your employees be more efficient – and productive.

Tip:  Make sure you have industry specific software to help streamline your business’s sales management, quoting, ordering and scheduling.  Many other costs will evaporate due to the elimination of re-keying, unnecessary paperwork and other bottlenecks.

Hopefully, none of this has come as a shock to you.  A good employee should pay for themselves three or four times over by generating business and working productively.  And remember, as quickly as costs add up for your current employees, the cost to replace is always substantially higher.