Planning, Startups, Stories


Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

3 Questions Business Owners Need to Ask About Employee Expenses 2

Do you own a business? Do you run a business? Then I recommend you follow me through this simple math and some reasonable conclusions.

Assume you have a person making a $50,000 gross salary. Assume their true cost — including health insurance, overhead, work space, computers, Internet, electric power, payroll taxes, etc. — is $80,000. That person costs your company about $40 per hour.

For that calculation, I divide the $80,000 by 49 to calculate the weekly cost of $1,633 (I take off two of the 52 weeks in a year for vacation and another for national holidays). I divide that weekly cost by 40 to get $40.82 per hour.  And then for convenience I round that to $40 per hour.

So, with that hourly cost in mind, I’d ask myself these questions:

  1. Thinking about computers and Internet connections: Do I really cut costs by having employees working with old technology?
  2. Books and magazines: I’m betting $15-20 per business book, or annual magazine subscription, on saving my people some time, generating good ideas, helping them work better. So the marketing books for the marketing team, programming magazines, business magazines, how expensive are they, really? How much do they have to help to pay for themselves?
  3. Meeting expenses: how much does it cost me to start a meeting 10 or 15 minutes late? Is it worth it to bring lunch into a meeting to save my team members the time of going out to lunch?

My conclusion: spend the money. Keep your technology up to date, encourage employees to get whatever books and magazines or website subscriptions help them, and combine meetings with meals a lot.

What do you think?

  • aironealvaira

    I am not yet very experienced person running a business, but all i can say is thats very a brilliant idea sir Tim, i’d experienced to become employee also and its very favorable for me having a lot of resources to make me become better person..happy and satisfied working in a company. that way, my loyalty is for my boss only.. In my own perception its not an Expenses its an Investments..
    I always believe that employees are the backbone of the company..

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  • http://syncapps.cazoomi.com Clint Wilson

    Great read Tim:) and keeping our team leads’ technologies they use daily current is a huge money saver in our business @cazoomi