The Cost of Hiring: Salary vs. Total Burden

Item	Typical Range	Quick Note
Base Salary	100%	The number you usually negotiate
Payroll Taxes & Statutory Costs	10% – 18% of salary	Social security, Medicare, unemployment, etc.
Benefits (health, retirement, leave)	10% – 30% of salary	Varies by country, industry, and generosity
Overhead (office, tools, admin)	5% – 25% of salary	Space, software, equipment, management
Hiring & Onboarding	5% – 20% of first-year salary	Recruiting, training, ramp-up time
Total Burden	130% – 200% of salary	You usually pay 1.3x to 2x the base

You do not pay a salary. You carry a burden. Every person on payroll comes with taxes, benefits, tools, managers, meetings, ramps, and sometimes exits. If you only look at the salary line, you will almost always overhire, underinvest, or misprice your products. The whole point of getting clear on “total burden” is simple: you want to know the real cost of a hire before you say yes.

What “Total Burden” Really Means

When founders talk about costs, they talk about salary. When finance teams talk about costs, they talk about burden.

Total burden is the full yearly cost of a person to your business. Not just what lands in their bank account.

It usually includes:

– Base salary
– Employer taxes and mandatory contributions
– Benefits
– Overhead
– Hiring costs
– Training and ramp time
– A share of management and HR time

If you are bootstrapped, misreading this number can break you. If you run a larger company, misreading it will ruin budgets, margins, and hiring plans.

A smart hiring decision is not “Can I afford this salary?” but “Can this role return more than its full burden?”

Technically, total burden can include even deeper allocations like a share of legal, finance, and executive leadership, but for decision making, you do not need a PhD model. You just need a clear, honest range.

Salary vs. Total Burden: A Simple Example

Say you are hiring someone for a 70,000 salary role.

You might think: “Can I afford 70k?”

But the better question is: “Can I afford 110k to 140k per year for this person?”

Here is a simple picture for a typical small business or startup in a high tax, high benefit country:

– Base salary: 70,000
– Employer taxes: 9,000
– Health benefits: 8,000
– Retirement match: 3,500
– Paid time off cost: 5,000
– Office, tools, software: 7,000
– Training and onboarding per year (amortized): 3,500

Total burden: 106,000 to 110,000+

That is already around 1.5x salary. In many corporate setups, that multiplier will creep closer to 1.7x or 2x.

When you think “70k hire,” your P&L often feels a “110k hire.”

You can debate exact numbers. You cannot debate the direction. Total burden is higher than you think, almost every time.

Why Understanding Total Burden Changes How You Hire

When you see the full burden, three things shift in your mind:

1. Your bar for hiring goes up. You only hire when the value is clear.
2. Your expectations go up. You know this person needs to return more than their burden.
3. Your pricing and planning improve. You stop underpricing work because you based rates on salaries only.

For your life, this also changes how you think about your own job. What you cost and what you bring back.

If your total burden is 120k and you bring 150k in clear value, you are not overpaid. You are underpaid.

This also explains why some managers feel pressure when they request a new role. Finance is not looking at the salary; they are looking at the burden.

Breaking Down the Total Burden

1. Base Salary: The Obvious Part

Base salary is the easiest part. This is the number in the offer letter.

For planning, you usually think in yearly terms, but you should also look at:

– Monthly cost
– Daily cost (salary / roughly 260 workdays)
– Real cost per productive hour

If someone earns 70,000:

– Monthly: about 5,833
– Daily: about 270
– Hourly (assuming 1,800 real work hours per year): around 39

Then remember: that is just wage. Not burden.

2. Employer Payroll Taxes and Mandatory Contributions

This category is boring, so many founders skip it mentally. That is a mistake.

Typical items:

– Social security or pension contributions
– Medicare or national health contributions
– Unemployment insurance
– Workers comp
– Mandatory public benefit funds in your country or region

The combined rate will vary by country and by salary level. For planning, you can often use a flat internal estimate, like:

– 12% to 18% in many Western countries
– Sometimes lower in parts of Asia or Eastern Europe
– Sometimes higher for specific wage bands

Example on 70,000 with a 14% total employer tax rate:

– Employer taxes: 9,800
– New total: 79,800

We are not even at benefits yet.

3. Benefits: The Silent Multiplier

Benefits are where total burden starts to climb fast.

Common employer-paid benefits:

– Health insurance
– Dental, vision, life insurance
– Retirement or pension match
– Disability insurance
– Paid vacation, holidays, sick days
– Parental leave top ups
– Bonuses that are basically fixed each year

Some of these show as a separate line. Some are baked into culture. “We give 25 days vacation” sounds nice, but those days have a real cost tied to salary.

Health Insurance and Similar Benefits

Say your health plan costs 600 per month per employee, and you cover most of it:

– 600 x 12 = 7,200 per year
– You cover 80%: 5,760 per year per person

On 70,000 salary, that is an extra 8.2 percent.

If you also pay for dental, vision, and life, you might land closer to 10 percent or higher.

Retirement or Pension Contributions

A common setup is a match of 3 to 5 percent.

On 70,000:

– 3% match = 2,100
– 5% match = 3,500

Now we stack:

– Base salary: 70,000
– Employer taxes (say 14%): 9,800
– Health + insurance: 5,760
– Retirement: 3,500

Subtotal: 89,060

We have not touched office, tools, recruiting, or managers.

Paid Time Off Cost

This one is tricky. Vacation is not a separate line item in most budgets, but the cost exists.

If you give:

– 20 days vacation
– 10 holidays
– 5 sick days

That is 35 paid days not working.

Out of roughly 260 working days, they work 225 and are off 35. But you still pay full salary for 260 days.

You do not need to create a complex formula for each person, but you should accept that your real cost per productive day is higher.

Imagine you pay 270 per day (70,000 / 260). On 225 productive days, your cost per productive day jumps closer to 311.

This is why total burden feels heavy.

4. Overhead: The Invisible Part Everyone Underestimates

Overhead is every support cost that lets that employee function.

This usually includes:

– Office space or coworking
– Desks, chairs, devices
– Software subscriptions and licenses
– IT support
– HR, payroll, accounting
– A share of leadership and management time

You will rarely break this down per person every month, but for planning, you need a simple rule of thumb.

Many financial teams will apply an overhead allocation as a percent of salary, such as:

– 10% for lean, remote-heavy companies
– 20% to 30% for office-heavy or corporate setups

Pick a reasonable guess and stick with it for planning. You can refine it later.

Office and Remote Setup

Office costs per employee can include:

– Rent and utilities
– Cleaning
– Office internet
– Office insurance
– Snacks, coffee, supplies

If your rent and office costs are 20,000 per person per year, that alone is almost 30% on top of a 70,000 salary.

Remote is not free either. You still have:

– Home office stipends
– Laptops and replacements
– Extra security tools
– Communication tools

Remote overhead may be lower per person, but it exists.

Software and Tool Stack

Say your employee uses:

– 15 per month project tool
– 15 per month communication tool
– 30 per month CRM/license
– 50 per month other tools (tracking, cloud, automation, etc.)

You end up around 110 per month, or 1,320 per year, for just a small stack. In many businesses, this is 2 to 5 times higher.

Again, not a deal breaker. But this is where burden grows.

Management and Support Time

If a manager leads 5 people and spends half their time on direct management tasks, then 10 percent of that manager’s cost can logically land on each person.

You do not need to run that math every month, but you should respect the idea.

One employee does not just cost their own pay. They also cost some share of the system around them.

5. Hiring and Onboarding Costs

Now we move to the cost of finding and ramping someone.

These costs usually hit hardest in year one, but they still matter for long-term thinking.

Recruiting Costs

Think through:

– Job board postings
– Recruiter fees
– Time spent by hiring managers and interviewers
– Assessment tools

Recruiter fees alone can run:

– 15% to 25% of first-year salary for agencies

On a 70,000 role at 20%:

– Recruiter fee: 14,000

If you expect this person to stay 4 years, you can spread that cost:

– 14,000 / 4 = 3,500 per year

So add about 5% of salary per year just from the initial hire, for planning.

Onboarding and Training Time

New hires do not produce full value for a while. Often several months.

Let us say:

– Month 1: they run at 30% productiveness
– Month 2: 50%
– Month 3: 70%
– From Month 4 on: 100%

This is not perfect math, but you can already sense there is a real cost in that ramp.

Roughly, you are paying full salary for less than full output for about 3 months.

Add:

– Training content creation
– Time mentors spend teaching
– Mistakes made while learning

Again, you do not need to calculate to the cent. A practical way is to assume that the first year of a new hire carries an extra 10% to 15% hidden cost relative to steady-state years.

Putting It Together: A Practical Burden Multiplier

You do not need a complex model to run smart hiring decisions. You need a simple multiplier by role type, and some common sense.

You can build internal rules of thumb like:

– Junior or support roles: 1.3x to 1.5x salary
– Technical or specialist roles: 1.5x to 1.8x salary
– Senior management: 1.7x to 2.1x salary

This means:

– 50k salary junior role might cost you 65k to 75k
– 100k engineer might cost you 150k to 180k
– 200k executive might cost you 350k or more, once you factor in bonuses, equity handling, assistants, travel, etc.

If you walk into a budget meeting with “salary only” numbers, you are negotiating with fiction.

A Sample Calculation: 100k Hire

Take a mid-level role with a 100,000 salary.

Step by step estimate:

– Employer taxes (15%): 15,000
– Health and other insurance: 9,000
– Retirement match (4%): 4,000
– Overhead allocation (20%): 20,000
– Hiring and onboarding amortized: 7,000

Total burden: 155,000

So your practical multiplier is 1.55x.

If your finance team usually sees around 1.6x to 1.7x, adjust your planning upward.

How This Changes Your Hiring Decisions

1. When You Ask “Should I Hire?”

Most people ask:

– Do I have 100k in budget?

What you really need to ask:

– Do I have 160k in budget?
– Can this person create more than 160k in clear value each year?

“Value” here could be:

– New revenue they bring or enable
– Costs they remove
– Time they free up for other high value work
– Risk they reduce

If the answer is fuzzy, pause, or reshape the role.

2. When You Decide Between Full-time, Part-time, or Contractor

The salary vs burden gap is one reason contractors often look “expensive” by the hour.

A contractor might charge 80 per hour while an employee makes 40 per hour.

But:

– The contractor’s 80 includes their own taxes, benefits, tools, and maybe their own risk.
– The employee’s 40 is only salary. Your 40 cost may be closer to 60 or 70 once burden is added.

Paying a contractor 80 per hour for 600 hours per year (48,000 per year) might be cheaper than hiring a part-time or full-time role with full burden.

Contractor vs employee is not only about cost, of course. It is also about control, culture, and retention. Still, when you account for burden, some contractor rates start to look more reasonable.

3. When You Set Prices for Your Products or Services

If you run a service business, this is where people get hurt.

They look at salary only to set hourly rates.

Example:

You pay a designer 70,000.

You think:

– 70,000 / 2,000 hours = 35 per hour cost
– If I charge 70 per hour, that is a nice margin

But after burden, the real cost per productive hour might be:

– Total burden: 110,000
– Real productive hours: maybe 1,600 after holidays, meetings, admin
– Real cost per hour: about 69

Your 70 per hour rate now looks pretty weak, not healthy.

You might need to charge 110 to 140 per hour to have a stable margin once you include non-billable time, sales, and profit.

Understanding burden stops you from undercharging and wondering why you are always tired and cash poor.

Connecting Hiring Cost to Performance and Life Growth

This is not just a finance topic. It ties into how you grow your business and your life.

If You Are the Employer or Founder

When you hire, you are committing to a recurring burden that touches your stress, your sleep, and your personal finances.

Going from “Let me get this 100k role” to “I am signing up for a 150k+ yearly burden with people attached” changes your posture.

You become:

– More picky with roles
– More willing to invest in the people you have
– More careful with culture and retention

Because replacing someone repeats those hiring and ramp costs.

You also start to:

– Delegate intentionally, not just to get tasks off your plate
– Track performance against total burden, not just salary
– Talk with your team about how they can grow their impact, not just their tasks

That is business growth and life growth in the same move. You grow as a leader when you carry burden eyes open, not closed.

If You Are the Employee or Candidate

Understanding total burden changes how you see yourself.

Your employer is not just paying your salary. They are carrying extra taxes, healthcare, paid leave, tools, and overhead for you.

This has two useful effects:

1. You can negotiate smarter.

Instead of only pushing for every last bit of salary, you might:

– Ask how current benefits stack up
– Suggest trade-offs (like a bit more salary with a bit less on some benefit you do not value)
– See why your manager pushes back on certain raises

2. You can speak in value terms.

If you know your total burden is, say, 120k, and you can show that your work is tied to 250k of revenue or 150k of saved cost, your raise conversation changes tone.

You are not just saying “I work hard.” You are saying “Here is the multiplier I bring on the full cost of my role.”

That is what most owners actually care about. Value compared to burden, not hours compared to salary.

Common Mistakes People Make With Hiring Costs

1. Thinking WFH or Remote Removes Overhead

Many leaders assume remote work cuts burden sharply.

Sometimes it does reduce office space costs. Still, remote work can raise:

– Tool spend (more licenses, more online systems)
– Security and compliance spend
– Time cost of communication
– Management time and people programs

You might save 5,000 to 10,000 per person per year on rent and in-office perks. You might add 2,000 to 5,000 in remote-related tools and support.

So remote can help your burden, but it rarely cuts it in half.

2. Ignoring Attrition Cost

Every time someone leaves, you:

– Lose their ramped-up expertise
– Pay to find a replacement
– Pay again for ramp and onboarding
– Lose some team momentum

If your yearly turnover is 25 percent in a small team, your average burden per filled seat is higher than your base model.

You can react in two ways:

– Invest in stability and retention to reduce that churn
– Or accept high churn and build a model and culture that can handle it

What you cannot do is pretend churn is free.

3. Using Salary-Only Numbers for Headcount Planning

When teams build next year’s plan, they often say:

– “We want 5 engineers at 120k each, so 600k budget.”

Then finance comes in and says:

– “We need 1 million for those 5 seats.”

This is not finance being harsh. This is finance using burden.

If you run a smaller company without a finance team, you must do that conversion yourself. If you skip it, you will end up short on cash, late on payments, or cutting people at the worst time.

How To Build Your Own Burden Model

You do not need a consultant. You can make a simple burden model in a single spreadsheet.

Step 1: List Your Categories

Create lines for:

– Salary
– Employer taxes
– Benefits
– Overhead
– Hiring and onboarding
– Other recurring costs

You can keep “Other” open for things that are unique to your field, like:

– Professional licenses
– Safety gear
– Travel for in-person work

Step 2: Set Estimated Percentages

You do not need exactness on day one.

Start with:

– Employer taxes: X% of salary
– Benefits: Y% of salary
– Overhead: Z% of salary
– Hiring: W% of salary per year (amortized)

Example:

– Taxes: 14%
– Benefits: 18%
– Overhead: 20%
– Hiring: 8%

Your multiplier would be: 1 + 0.14 + 0.18 + 0.20 + 0.08 = 1.60

So you know your total burden is about 1.6x salary on average.

You can then build more precise versions per role:

– Engineers: 1.7x
– Sales: 1.8x (heavy commissions, travel)
– Support: 1.4x

Step 3: Check Against Reality

After a year, or even after a few months, compare:

– Total payroll
– Total benefits
– Total overhead
– Total recruiting and training costs

Divide by number of employees and by total salaries.

You will get a real company-wide multiplier. It may be higher or lower than your guess. Adjust your planning numbers accordingly.

Step 4: Use the Model To Make Actual Decisions

Once you trust your estimates, apply them to questions like:

– Should we add a new role or give overtime to current staff?
– Should we go full-time or contractor?
– Are our prices still correct for next year?
– Can we afford that extra headcount the sales leader wants?

If you keep the model in a simple sheet, you can play with ranges instead of single values:

– A pessimistic multiplier (higher burden)
– A base multiplier
– An optimistic one

Then you make your choice with eyes open.

How Total Burden Ties Into Your Personal Growth

This topic can feel cold. Numbers, percentages, and line items.

But it relates directly to your life.

If You Lead a Team

Seeing the true cost of a role changes how you show up as a leader.

You:

– Treat people more like partners, because you see the real investment
– Spend more time clearing roadblocks, because time waste is expensive
– Care more about fit before hiring, because mis-hires are heavy burdens

It also pushes you toward better conversations. Someone asks for a 10k raise. You do not react emotionally. You look at their total burden, their output, and you talk through a plan.

You can say:

– “You cost us around 120k a year and bring 180k in clear value. If we push your total burden to 135k, what needs to change in your scope or impact to make this work?”

That is an adult conversation. It helps both sides grow.

If You Are Growing Your Career

Knowing your own total burden helps you:

– Judge offers more clearly
– Compare full-time, freelance, and consulting work
– Decide how much value you truly need to bring

If you jump from 80k salary to 110k, your total burden to the company might jump from 120k to 170k.

To stay safe in that seat, you want your value to land far above 170k. So you start asking questions like:

– “Where can I own revenue?”
– “Where can I remove real cost or risk?”
– “What can I learn that increases my leverage, not just my hours?”

That is how business growth and life growth connect. You are not just climbing a salary ladder. You are expanding the gap between your total burden and the value you bring.

Your long-term career security sits in the difference between your burden and your value, not in your job title.

When It Actually Makes Sense To Hire

Once you see the real cost, you might feel hesitant about hiring at all. That is not the goal.

The goal is to hire with sharper criteria.

Here is a simple filter:

1. Estimate total burden for the role.
2. Define what “success” looks like over 12 to 24 months in numbers.
3. Make sure success is at least 2x burden in measurable value.
4. Check if you can make the role attractive enough for a strong person to hit that.

If you cannot hit 2x, you are not required to skip the hire. But you should know you are choosing a more fragile setup.

Sometimes you still hire for reasons beyond money. Maybe you need redundancy. Or you want to protect your health. Or there is a long-term bet you believe in.

You are free to do that. Just do it with clear eyes about what the role really costs.

Where To Go From Here

Next time you think about a 60k, 100k, or 200k hire, pause.

Do not ask “Can I afford this salary?”

Ask:

– “What is the total burden of this role in my business reality?”
– “What shape of person and role justifies that burden?”
– “How will we measure if that burden is actually worth it 12 months from now?”

If you start there, your hiring decisions will get better. Your pricing will get clearer. Your team will feel more stable. And you will feel less surprised when you look at your bank account at the end of each month.