How to Justify a New Hire Financially
Adding a new employee increases your fixed costs immediately. The question is: how much additional revenue does your business need to generate to cover the cost and break even? This calculator answers that clearly, using your actual margin structure.
Calculation Method
- Total Labor Cost = Salary ร (1 + Payroll Tax Rate)
- Required Revenue = Total Labor Cost รท Contribution Margin %
US employer payroll taxes: 7.65% FICA + ~1โ3% FUTA/SUTA = approximately 9โ11% total burden.
Frequently Asked Questions
Yes. Health insurance, retirement contributions, and PTO can add 25โ40% on top of salary. For a complete picture, enter the all-in compensation cost per month.
Revisit whether the hire is enabling revenue growth or simply adding overhead. Consider adjusting responsibilities or timing of additional hires to match actual sales trajectory.
Employer FICA is 7.65% (Social Security up to $176,100 + Medicare). Add FUTA (0.6% on first $7,000) and SUTA (varies by state, typically 1โ5%). Total is roughly 9โ13%.