Hey! It’s 2018. The economy is good, your business is good and you’re ready to add a few more sales people and/or support staff. You’ve done your research and the going rate for new blood is about $30,000 – $40,000 per year (depending on your geographic location). Not bad, you think. Well, think again. You’re going to be pretty surprised when you discover that on average an employee will actually cost you 25%-40% more their actual salary! When you add up all the other expenses it might make you think twice about hiring that much needed help… but what if there was an alternative?
On top of your employees salary, you are also responsible for paying employment taxes. Yes, the government taxes you to give someone a job… isn’t that fun?
On average, employment taxes are about 15% of an employee’s salary ($40k x 15% = $6000). In addition to employment tax, you are responsible for paying Social Security, Medicare, Federal & State Unemployment Insurance Tax, Workman’s Comp Insurance, local payroll taxes, the list goes on and on. All these sweet taxes can cost you an additional 15% ($6000, in our example). So, a $40,000 per year hire is going to cost you around $12,000 in taxes alone.**All taxes are estimates**
I’m not sure when in history that it became the employer’s responsibility to offer health insurance but most employees expect it. Don’t get me wrong, it’s an awesome perk to be able to offer employees, but it comes with a serious expense to you, the employer. You just need to be aware of the additional monthly premiums paid for your employees’ health insurance. If you’re a really cool boss you’ll pay 100% of the monthly premium… you want to be competitive don’t you?
Paid Time Off
It’s not just employment taxes that you have to worry about, you also have to consider the amount of time your employee is not actually working; PTO (paid time off). Vacation, sick days, maternity leave, personal time off, paid holidays, and mandatory paid breaks all add up to a serious lost in production and therefore, a cost.
Do you offer employees retirement savings, such as an IRA or 401(k)? Typically, you, the employer will offer to match the employee’s contribution, up to a certain percentage. On average, your contribution to their retirement will cost you about 3-6% of the employee’s salary and this does not account for any additional costs required to manage the plans.
Other Overhead Costs
Feeling a little sick to your stomach? Wait, there’s more. You also have to account for the additional overhead costs associated with each new hire:
• Working Space: Do they need a new desk, computer, chair, phone, printer…
• Supplies: Your employees need pens, paper, staples, water, coffee, snacks, printer toner… all this adds up.
• Training: Who’s going to train your new employee?
• HR: Every new hire needs an employee contract, handbook, etc etc.
• Payroll Processing: Who handles your payroll? Payroll company’s generate checks, calculate tax deductions, submit payroll tax deposits to the government, filing payroll tax forms, submit W-2’s etc. Most payroll company’s charge a fee per employee.
• Insurance: Are you required to carry insurance?
• Other Stuff: Is there anything else that is a cost to your business that you offer your employees? Lunch’s, health club memberships, company car, etc.
Now, I’m not an accountant so don’t take my word for any of this but if my math is even kinda right, an employee hired at an annual salary of $40,000, will actually cost you as much as $56,000, maybe more.
Don’t despair. Earlier, I hinted that there might be an alternative. If you desperately need to grow but are not at all excited about the prospect of spending 25%-40% more than the employee’s salary you might want to explore the idea of outsourcing… we’d love to chat.
Trends in Construction
Although there are still many challenges, there is hope. Contractors will need to keep up with technology and strategize around a shortage of labor. The following is a list of major construction trends for 2017:
Shortage of Skilled Labor
During the recession, a large portion of the employees left and never returned.
Most experts agree that the shortage of the skilled labor in the construction industry is a problem that will continue for the foreseeable future.
A major challenge for new projects will be finding the right people for the job with the right skill set.
Unfortunately this is a trend that will continue to be an issue this year and years to come.
Single-family and multi-family residential buildings
Single-family residential buildings are expected to continue at or near the 17% current growth trend.
The trend in the multi-family residential building is expected to slow down in 2017.
Offsite / Modular Construction
Prefabricated construction solutions or modular construction is expected to gain momentum with a high rate since it is believed to be one of the better construction solutions offering many advantages in terms of construction time reduction.
Contrasting it with other methods that are common and that most of the organizations stick to, among them in the list of the advantages is that it minimizes the waste and cuts expense.
Therefore, taking into account all the benefits realized with the prefab method, this is one of the trends seen providing greater focus this year and it will continue to be on the rise the coming year; mostly in the health sector.
Popularity of sustainability and “green” processes will result in contractors being expected to embrace this concept by making sure that they recycle materials and repurpose materials. In addition, contractors should be versed in renewable energy procedures and sources.
Technology in Construction
The latest technology is quickly finding it’s way into the construction industry. Smartphones, drones and software are disrupting the industry and should result in overall project cost reductions.
It is our opinion that the construction industry is in full recovery from the last economic recession. Advancements in the industry are expected to rise in 2017 which will affect the overall performance of the industry. In short, the future looks bright for the construction industry and companies looking to grow should invest heavily in themselves and their teams.