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Comment by zaroth | Hacker News Reader

Wages are at most 70% of the cost of an employee to a business, and possibly as low as 50% of the fully burdened cost. For an employee to gross $100k on their paystub (before their own taxes), a competitive employer in NYC is likely paying a full burden (with payroll taxes, insurance, other benefits, admin overhead, office space, and supplies) not too far from $218k.

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Wow. That's amazing. I genuinely had no idea that the costs of running could be that high. Thanks for sharing that info. It boggles my mind as to how much money startups probably need just to stay break even.

I think the parent's estimate is a little high, but here's what I know. w2 employers are responsible for

- 6.2% SS + 1.45% medicare fica taxes

- health insurance, of which the employer's share can easily run $1k/mo for a couple in their 30s

- 1.5% payroll tax if in sf, or 0.34% payroll tax for mta in nyc;

so if someone makes $100k in sf, the employer pays

   (1.0 + 0.0765 fica + 0.015 city payroll tax) * 100k
   + 12*1k health insurance
   + 12 * $1200 monthly rent
   + 12 * $100 snacks/office supplies
   + maybe $500/year for unemployment insurance and various other fees

totaling (1.0765 + 0.015) * 1e5 + 12*(1e3 + 1.2e3 + 100) + 500 = $137k. That doesn't include any activities, hardware, or meals. If you buy lunch, a former employer budgeted $14 per person day, so assuming 250 work days = $3500/year

You also have to consider employees who make money vs. employees who cost money. Administrative overhead, management, etc. aren't often major contributors to revenue, but their cost metrics are the same. So the burden on money making employees can be considered to be even higher.

You can get some economies of scale with more revenue generating employees vs. cost center employees, but no matter what, as companies grow they need cost center employees to make the ship sail.

Another 0.9% ($939 max) for CA SDI, $250 workers comp, and the employer probably has some sort of life & disability of their own as well, call it another $500. Payroll & benefits admin for $500. $12k health insurance contribution seems low, but I suppose population skews to 20s and single.

I do think 70% is about the best you can really do ($142k), but I agree 50% would be lavish. Throw in a regular dinner program, or some regular offsite meals & entertainment doesn't hurt. Since 274(e) expenses are fully deductible, IRS is basically paying for 35-40% of that annual picnic, holiday dinner, Caribbean retreat, etc. so it's smart for companies to shell out some real money for these outings.

Thanks! I think there's also about $500/pp of various fees in CA; stuff charged on the first $7k of income.

tangent: security via obesity is a cool idea.

Which makes it even more crazy that after the employee pays taxes, the take home only about 70% of that.

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