Employee Cost Factors…
Most business owners stared their business to do one thing - provide a quality product or service for which they expected to be paid a fair price by the consumer using their product or service. Instead, small business owners have found that they and their business are held accountable for areas in which they have no training and little interest.
For example, the owners of a print shop may have thought they only had to be good printers to stay in business, but to their horror, find that they are expected to become experts in labor and employment laws, immigration law, federal and state tax codes, government reporting procedures, and so on. All of these activities are nonproductive (i.e.,non-income producing activities).
Business owners find, to their dismay, they're held financially liable for any mistakes they make in constantly changing legal and reporting requirements. Mistakes in these areas can be so costly that a good business can go under. According to the U.S. Department of Health and Human Services (1986), an average manager spends up to "twenty-three percent (23%) of his or her tie handling the required nonproductive employee-related administrative paperwork." Most small employers are so burdened by paperwork they have not taken the time to investigate the real costs they are paying for employee related overhead.
Both the Wall Street Journal and the U.S. Department of Health and Human Services found that thee average business spends approximately 39% of gross payroll on employee administration, taxes and benefits. When the costs of turnover and recruitment are added, average employee-related costs total 40%-50%. The worker grossing $6,00 really costs the employer up to $10.00 per hour. The $24,000 annual salary actually costs between $33,600 and $36,000.
So, what is a small company's biggest cost and the least controllable cost in their budget? "Direct and Indirect Employee-Related Cost"