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Any business that isn’t a solopreneur endeavor is going to find itself in need of employees at some point. They are the ones who handle the day-to-day events and customer interactions. Without quality employees, a business suffers. As with most worthwhile things in business, adding employees comes at a cost to your business.

Insurance Costs

Businesses need multiple forms of insurance. Some of those relate directly to your employees. You’ll need to pay for unemployment insurance at both the federal and state level. Businesses are also legally required to carry workers’ compensation insurance in most states. The cost of the types of insurance you need to carry will depend in part on the state you’re operating in and on the nature of the work your business does. When you add employees, you’ll need to make sure they are covered by your policies. If they aren’t, you’ll need to purchase additional coverage.


Employees don’t work for free. Naturally, there are compensation costs associated with a new hire. How much you pay your new employee often depends on factors like their level of experience, education, and position in the company. Jobs in some industries come with particular hazards that you need to factor into compensation. Compensation goes beyond just an hourly wage or salary though. You’ll need to factor in the costs associated with any benefits you offer, such as health or dental insurance, retirement contributions, PTO, or vacation and sick leave. There are also FICA taxes you’ll need to plan for as well, based on the compensation you’re offering.

The Cost of Training

One of the easiest costs to overlook is the cost of training a new employee. Even the most experienced employees will need to be shown the ropes specific to your business. Training new employees easily costs hundreds of dollars, even upwards of a thousand. Think about it. You need to pay for your new employee’s time, as well as the time of the person training them. While training is taking place, it’s coming at the expense of whatever tasks the trainer might otherwise be accomplishing. It’s a temporary reduction in productivity and increase in expenses that hopefully pays off down the road.

Employees don’t come cheap. There are insurance costs, the cost of compensation, and the expense of training to account for. The hope is that the employees you hire will be worth what your company pays to employ them and that they will make you more than they cost. That’s part of why it’s so important to make sure you’re doing everything you can to hire good employees.

If you’re starting a business, it’s important to cover your liabilities. Check out our business insurance offerings here!