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Comment by EGreg | Hacker News Reader

We hire overseas, so we get by on around $6,000 per month per employee.

I'm employee #1 at a Canadian startup, and they get by paying me about 3300 per month, before tax. Based on my asking-around, this doesn't seem to be out of the ordinary for the area.

That's only one portion of the costs. Besides the associated taxes and insurance they have to pay rent/utilities, purchase equipment, etc etc. The quoted figure was total expenses / employees, not employee compensation.

The figure I've heard is 1.25-1.5x base salary.

That sounds right for direct staffing costs (health insurance isn't cheap!), but low if you mean counting in all the other stuff. I suppose it depends on the business--someone like Dropbox spends a lot more on servers than say Groupon.

Right, that's for the incremental cost of each employee: taxes, benefits, equipment (for the individuals, not servers), office space. It's useful for calculating how much a new employee will cost you.

I've always used a rule-of-thumb of a 100% overhead rate for employees - it's a spectacularly easy number to work with mentally, and its right to well within acceptable error bounds an awful lot of the time.

If I'm paying you $90k, I'll expect to incur an additional $90k in costs resulting from employing you.

Server costs will continue to decrease, whereas salespeople will continue to demand more (we aren't going to lower the minimum-wage).

Correct - the term used is "fully burdened cost per employee". The general rule of thumb is to multiply salary by 1.25 - 1.5.

Depends on what you're doing there. But yes, cost per head is not 100% compensation. If you've got multiple employees @ a start-up making $180,000 per year there's an issue.

//Now, if they've re-mortgaged their house and are eating $180k per annum in equity / stock instead of salary, then it could be an almost-fair-number.

Not sure where you are in Canada but I know thats pretty damn low for big cities like Toronto, Ottawa or Montreal.

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