Most hiring decisions are made on workload: the team is stretched, so you hire. That is the right reason. The cash question is different, and it is worth asking separately: can the business carry this person through its worst month, before they have made any difference?
Start with the real cost
Salary is only part of it. Payroll taxes, benefits, equipment and software add between 15% and 30% in the US, depending on the role and the state.
| Item | Per year |
|---|---|
| Salary | $72,000 |
| Employer payroll taxes | $6,100 |
| Health insurance contribution | $7,200 |
| Retirement match, 3% | $2,160 |
| Laptop, software, tools | $1,900 |
| Fully loaded cost | $89,360 |
That is about $7,450 a month, or roughly $1,720 a week. Use that number, not the salary, in every check below.
Allow for the ramp
New people take time to pay for themselves. A salesperson may take two or three quarters to bring in steady revenue; a production hire may be productive in a month. Plan for the cost from day one and the benefit from a realistic later date.
Plan for the cost from day one, and for the benefit from a realistic, later date.
The trough test
Add the fully loaded cost to your forecast from the start date, with no extra revenue. Then look at the lowest week in the next twelve months.
- Still above your cash floor: you can afford the hire, even if it takes longer than planned to pay off.
- Below the floor, above zero: it can work, but decide now what you will do in that week. A later start date, a deposit from a client, or an undrawn credit line.
- Below zero: not yet. Look again after the next busy season, or consider part-time or contract help first.
Time the start date
For seasonal businesses, the start date can matter as much as the decision. Hiring just before the busy season means the person is trained when you need them and their first months are paid for by peak income. Hiring at the start of the quiet months does the opposite.
See your own thirteen weeks, built from your real bank balances.