How Much Does an Employee Cost?

by Team Tradify, March 11, 2025

New employees can generate growth and revenue for trade businesses. However, failure to properly calculate the true cost of an employee before hiring can cause serious financial pressure down the line. To figure out the true cost of hiring a new employee, businesses must factor in their wages, as well as payroll taxes, benefits, training, and equipment costs.

Calculate employee costs accurately with our free Employee Cost Calculator!

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Base salary
Payroll, taxes & superannuation/pension contributions
Employee benefits
Training & certifications
Tools, equipment & uniforms

1. Base salary

The largest (and most obvious) cost to hiring an employee is their salary. While this will vary depending on industry, experience, and location, at the very least, you’ll need to meet local minimum wage laws.

United States: The federal minimum wage is $7.25 per hour, but many states set higher rates.
United Kingdom: The National Minimum Wage for workers over 21 is £11.44 per hour.
Australia: The national minimum wage is $24.10 AUD per hour.
New Zealand: The minimum wage is $23.50 NZD per hour.

However, simply meeting these requirements may not guarantee the best talent. When calculating a new employee's base salary, a good starting point is to consider how much value they will bring to your business.

Are you charging enough per hour? Use our free calculator to find the right charge-out rate.

2. Payroll, taxes & superannuation/pension contributions

The last thing you'd want to forget is to factor in the taxman. As responsible employers, you are responsible for payroll taxes, pension contributions, and other mandatory payments.

These vary by country, but include:

United States: Employers must pay Social Security (6.2%) and Medicare (1.45%), plus state and federal unemployment taxes.
United Kingdom: Employers pay 13.8% in National Insurance Contributions (NICs) for earnings above £9,100 per year.
Australia: Superannuation contributions are set at 11% of wages (increasing to 12% by 2025).
New Zealand: Employers must contribute at least 3% to KiwiSaver.

3. Employee benefits

Securing the best talent often involves going above and beyond. Providing competitive benefits helps attract and retain skilled workers, but adds to hiring costs. However, it's important to note that even if a benefit you offer is considered optional, it might still have to comply with certain laws if you offer it within their contract.

Mandatory benefits include:

Paid annual leave
Sick leave and public holidays
Workers' compensation insurance

Optional benefits:

Health and dental insurance
Performance-based bonuses
Company vehicles or fuel allowances
Flexible working arrangements
Additional holiday leave
Gym memberships
Tool allowances
Daycare arrangements

For detailed benefit requirements, refer to:

4. Training & certifications

Depending on your industry, part of your investment into a new employee will include ensuring they comply with industry regulations. For some industies, Some training is mandatory, depending on trade licensing requirements.

Common training costs:

First aid and health & safety training
Industry-specific certifications (e.g., electrical, plumbing, HVAC licensing)
Software or equipment training

Government grants may be available for training new employees. Check:

UK Apprenticeship & Training Grants
Australia’s Training & Apprenticeship Support
New Zealand Small Business Training & Apprenticeships

For businesses hiring apprentices, read How to Hire an Apprentice and Incentives for Employers to Hire Apprentices.

5. Tools, equipment & uniforms

Many trade businesses supply tools, protective equipment, and uniforms for their employees.

Common expenses include:

Power tools and hand tools
Work uniforms and branded gear
Personal protective equipment (PPE)
Work vehicles or fuel reimbursements

Depending on your location, some costs may be tax-deductible. Check:

Estimating the hiring costs for your business

Every business is different, and hiring costs depend on your location, industry, and the type of worker you employ. Use the Employee Cost Calculator to get a tailored estimate for your business.

For further guidance on hiring and managing staff, check out these resources:

Hiring is a big investment, but with proper planning, it can set your business up for long-term success.