The five lines of a staffing budget
Put every hire through the same five lines, or you end up comparing a wage with a fee.
- Pay: the wage, or the contractor's fee.
- Benefits and contributions: what an employer adds by law or by choice.
- Recruiting: your hours, job ads, recruiter or marketplace fees.
- Tools and set-up: software seats, equipment, payroll or payment tools.
- Management time: onboarding, check-ins and reviewing the work.
The first two repeat every month. Recruiting usually comes once, unless the person leaves or you pay through a monthly agency. Management time is heavy at first and then falls, but it never reaches zero.
Wage and benefits: the number most people misread
Across US private industry, benefits make up 30%[1] of total compensation. That share already includes paid leave, insurance, retirement and legally required contributions, so do not add those again.
It is also a share of the total, not a percentage on top of the wage, so what you add to the wage is larger than the share suggests:
From wage to employer cost
Employer cost = wage ÷ (1 − benefits share)
Benefits on top = employer cost − wage
Our cost of hiring pages run this sum by role and state, and also cover European pay. Treat the share as an average: your real benefit plan decides your number. In Europe, employer contributions differ by country, so ask your payroll provider rather than reuse a US share.
Recruiting: paid once, unless the person leaves
- Your own time: the job post, screening, interviews and tests. Most budgets leave this line out.
- Job ads: from free to a monthly subscription. On Stafka, posting a job is free; pricing shows when a fee applies.
- A recruiter: usually a one-time fee. Silkstaff's is $2,500–3,000[2] on the start day; others often charge a share of the salary.
- A marketplace: on Upwork, the client marketplace fee is up to 7.99%[3] of each payment, for as long as you pay through the platform.
- A monthly agency: no large fee upfront, but a margin inside every monthly price. Our guide to placement fees and monthly agencies has the break-even arithmetic.
Spread a one-time cost over the months you expect to keep the person, and price the risk of doing it twice: a hire who leaves early means a new search and new onboarding. Ask any recruiter what happens then, and get the conditions in writing.
Tools and set-up
- Software seats: email, chat, the CRM, the help desk, the password manager.
- Equipment: a laptop and a screen for an employee. Contractors usually use their own.
- Paying the person: a payroll service for an employee; for a contractor, Deel at $49[4] a month or Wise from 0.23%[5] per transfer.
- Onboarding: the weeks in which someone senior answers questions; see the first 90 days.
Employee, contractor or EOR: which lines change
Employee
Pay, benefits and contributions, payroll, and the cost of ending the employment if it comes to that. In return, you get the most control.
Contractor
The benefits and payroll lines mostly drop out. But the fee has to cover the person's own taxes, time off and equipment, so a contractor in your own market often costs more per hour than an employee's wage. Abroad, the pay difference between countries can outweigh that.
What you take on is a classification question: whether someone really is a contractor depends on how the work is done, not on what the contract says. A saving that rests on a wrong classification is not a saving; see our overview of contractors and employees abroad.
Employer of record
For staff abroad who should be employees: pay, local employer costs and a monthly provider fee. It costs more than a contractor set-up and saves you a foreign company. See EOR or contractor and the cost ladder for hiring abroad.
A cost sheet you can copy
Cost of one hire, first year
Pay: [monthly pay] × 12 = [A]
Benefits and contributions: employee, [A] ÷ (1 − benefits share) − [A]; contractor, any paid days off you agree = [B]
Recruiting: [your hours] × [hourly value] + [fees] = [C]
Tools: [seats and payroll or payment tool per month] × 12 + [equipment] = [D]
Management: [hours a week] × [hourly value] × 48 weeks = [E]
Year one: A + B + C + D + E. Year two: the same without C.
Compare routes on both years: a one-time fee weighs on the first, and a monthly margin repeats in every year. The cost of hiring calculator gives a quick first number.
Where a remote hire helps, and when we are not the right choice
A remote hire can lower the pay and benefits lines for screen-based work such as assistants, customer support, bookkeeping, HR and payroll admin. It can raise management time at first. See roles and costs by country.
We are not the right choice if the work must be done on site, if you need someone for a few weeks (a marketplace fits better), or if you want a firm that employs people for you or runs payroll: our guide to payroll options explains who does.
If it fits, browse anonymous candidate profiles or use Get 3 matching profiles. Most candidates apply through our Telegram bot with a written and a voice English task, each profile shows the English level (B1–C2), and Silkstaff checks English on a live call before any client interview. You contract with the person directly, and they keep their full pay. If they leave or do not work out within 180[2] days of the start date, Silkstaff replaces them free of charge: one replacement per placement, once the fee has been paid and as long as the role, hours and pay stay as agreed. The fee itself is not refunded.
Questions
How do you calculate staffing costs per employee?
Add the year's pay, benefits and contributions, recruiting, tools and the management time, using the sheet above. Divide one-time costs by the months you expect to keep the person.
How much does an employee cost on top of their salary?
In the US, benefits make up 30%[1] of total compensation across private industry, so the amount on top of the wage is larger than that share suggests. Recruiting and tools come in addition. Your own benefit plan decides the exact figure.
What percentage of revenue should staffing costs be?
There is no universal number. It depends on the sector and the business model, so compare with figures from your own industry. We do not publish a benchmark.
Are contractors cheaper than employees?
Often over a year, because benefits and payroll drop out, but not always per hour, since the fee has to cover the person's own taxes and time off. It is no saving if the person should have been classified as an employee. This is general information, not legal or tax advice.
General information for small employers, not legal or tax advice: check contracts, tax and data rules for your country with a qualified adviser. Figures carry their sources below; our own prices are on the pricing page. Spotted a mistake? Write to hello@silkstaff.com.