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Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.

TELLING TIPS: You’ve been working at your job for a while, and you know that your boss has a number of expenses, such as rent and electric, product and insurances, but have you ever wondered what you cost? Or you apply for a job, and the employer says that you’ll be paid as an independent contractor. Ever wonder why?

In a nutshell, on an average, the hidden costs are 25 to 40+ percent above your wage/salary. Here’s some of the detail:

  • Payroll Taxes
  • Social Security (6.2 percent) (The ‘payroll tax holiday’ does not apply to your employer.)
  • Medicare (1.45 percent)
  • Federal & State Unemployment Insurance Tax (~5 percent)
  • Workers’ Compensation and Workers’ Disability Insurance (~8 percent)
  • State and City employer fees (~3 percent)

If you are making $15/hour, the employer’s gross cost is about $18.

Holidays, Sick Days, Vacation, Breaks

Some of these benefits are required by Federal and State employment laws, or by your unions, or just because every business wants to be competitive. All of these paid times-off add to your salary, but needs to be paid for by your employer, who has to add an additional amount to their product sales price. How many paid days do you have a year?

Health And Dental Insurance

Many of you are receiving this benefit also, although there is a major trend not to offer this — or at least not in full. You know that this insurance has a hefty price tag.

On a side note, here are a couple of things your employer may consider:

  1. A Health insurance Premium-Only Plan (POP): You pay for your share of the premium by payroll deduction, as a salary reduction, and therefore you save income tax, Social Security and Medicare taxes.
  2. Flexible Spending Account Plan: Contributions to this plan are also considered a salary reduction. You contribute throughout the year, and are reimbursed for allowable medical expenses, including health insurance premiums, deductibles, and co-pays.

Retirement Benefits

Many of these plans are paid by you, the employee, but many employers match a portion of your contribution of up to six percent.

The employer’s cost for your medical insurance and retirement benefits is not just as mentioned, but there is a fee for running and for the Federal and State compliance of these plans. The average is about $5,000.

Overhead Costs

The most obvious is your work space and computer, and your desk, chair, and phone. Add the office supplies.

If you are a new employee, consider the extra time (in weeks or months) you need to learn your job proficiently, as well as the time to teach and supervise you.

If your employer is large enough, you might have been given handouts. Who prepares these handouts? Probably the HR department, consisting of those who do not directly add to company productivity, as well as legal help and production costs.

Let’s not forget the accountants who have to file the quarterly payroll tax reports, make weekly or monthly tax payments, and year-end W-2 preparation.

Additionally consider items your employer may provide like a uniform, tools, protective gear.

Conclusion

So if you are late for work a few minutes every week, or take extra time to get coffee or talk with a co-worker during the day, keep in mind that although you are probably a good worker (and definitely deserve the extra time, and a raise), the hidden costs are expensive.

Have a good week, and remember: A lot of people still have the first dollar they ever made. Uncle Sam has the rest.

Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.

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  • Whwsailboat

    Wow! I really feel sorry for the employer who has to pay all of these expenses. Too bad he can’t do away with all these costs and keep more money for himself. After all, what good comes from paying these costs. Maybe he can just import stuff from China and not have to pay these extra labor costs.

    • http://www.flickr.com/photos/lisanne001 Lisanne!

      We’re just not very appreciative. Americans have come to expect things like decent compensation for labor that others living in non-socialist countries like China recognize as more than they are entitled to. It’s time that Americans recognize that $5 a week compensation is more than adequate.

      Remember, without business there would be no labor. And business can survive very well without it.

      • Anonymous

        Why not create your own business, work for yourselves, and hire others at $50 an hour. You would be the best employer ever cause you’ld easily figure out how to start a business, provide a service/product to the consumer, compensate your employees well, and generate a profit for yourself. Easy!

        • levp
          • Anonymous

            Sure, some businesses are more successful than others. If you want to make it your personal policy never to work for a business that’s not in those top 10 – cool. Otherwise I don’t see the point of bitching that somebody else’s business is not doing as well as you think it should. Start your own and lead by example.

          • levp

            So if I am not a business owner, I have no right to argue for better working conditions?

          • Anonymous

            You can argue all you want just as your mechanic or your plumber or your cable company can argue for handing you a bill that’s higher than the competition. You know the choice you’ld make. If you want to make a good argument for higher wages try to gain a marketable skill that’s in high demand. Otherwise your argument will be not with your employer but with your peers who’ll be vying for your spot.

          • levp

            I don’t always pick the least expensive mechanic, plumber or even cable company.  For instance, I made a choice to shop at unionized Costco instead of, say, Target.

            Speaking of retailers, want to compete with unions for the hearts and minds of your employees?  Look no further than Trader Joe’s: http://en.wikipedia.org/wiki/Trader_Joe's#Employees
            “Trader Joe’s pays above-union wages: as of 2010, full-time crew members can start at $40–60,000 per year and store managers can earn in the “low six figures.” It contributes to an employee’s standard 401(k) plan. Trader Joe’s also offers health insurance benefits (dental, vision, and medical) to part-time employees and their dependents. All part-time employees are evaluated every six months with the possibility of a pay increase. They also receive a 10 percent discount on items bought at the store.”

          • Anonymous

            For some reason there’s no “reply” button on your latest post, so I’ll respond here. Like I said, some businesses are more successful than others. From your link – ”
             Fortune magazine estimated sales to be $1,750 in merchandise per square foot, more than double the sales generated by Whole Foods”. It also states “As of 2004, pay for entry-level part-timers was $8 to $10 an hour. ,” which is most likely in line with any other similar chain store. In any case – sounds like a problem solved! Everybody should go apply for a job at Trader Joe’s.

          • levp

            I agree!

            Treat your employees well,
            they will treat you and your customers well,
            your customers (like me) will go an extra mile to drive to Queens to your store to buy all their food there,
            you make even more money -
            everybody’s happy!

            Problem solved, indeed.

          • levp

            Or consider an alternative:

            You fire your Texas support engineer and hire a Bangalore support engineer for 4 times less pay and no benefits.
            Your customers get pissed off and take their business elsewhere, all the while writing on various rating web sites about their bad experience.
            You lose (more than money).
            http://www.msnbc.msn.com/id/4853511/ns/business-forbes_com/t/dell-moves-outsourced-jobs-back-us-shores

          • Anonymous

            Lev, sounds like that situation will work itself out. The business will lose customers, see the error of its ways, and will correct the situation. Isn’t the free market great?

          • levp

            Unless you monopolize a certain market (remember Ma Bell?) Everybody gets screwed and nobody cares.
            In some areas of the country, Walmart is Ma Bell of retail. In that case, they can pay women worker less than men for the same work, because where else are these women going to go – court? Ha ha ha…

          • Anonymous

            Ma Bell? Faulty analogy. Ma bell was the only phone provider – Wallmart is, by far, not the only retail store. As for women getting paid less than men? Link?

          • levp
          • Anonymous

            The article doesn’t mention the outcome of that lawsuit, but it does also mention Sam’s Club, which means that this claim is not unique to Walmart. What’s more a very similar lawsuit has been filed against Costco. 
            http://genderclassactionagainstcostco.com/costco94.pl

            Still going to shop there? :)

          • levp

            Sam’s Club is wholly owned by Walmart, so no surprise there. As for Costco, that is exactly why they have a union (which is subsequently why we haven’t heard anything about this lawsuit). A complete opposite of Walmart on both counts.

          • Anonymous

            Lev, ”
            Sam’s Club is wholly owned by Walmart, so no surprise there” – are you claiming a giant conspiracy by Walmart? As for Costco, you say “which is subsequently why we haven’t heard anything about this lawsuit)”. I haven’t heard anything about the Walmart, either. Have you? What’s the difference, again?

          • levp

            I don’t know about conspiracy, but I am pointing out that Sam’s Club and WalMart are not two different companies that you made them appear to be.
            Also, keep in mind that a lot of Costco locations are not union (however, Northeastern stores are). Even though, “eighty-five percent of Costco’s workers have health insurance, compared with less than fifty percent at Walmart and Target.” http://en.wikipedia.org/wiki/Costco#Labor relations

          • Anonymous

            Lev, fine, that’s why I mentioned Costco which was facing the same class action lawsuit. Union or not – class action. I don’t understand why you keep mentioning the union as if its some magic bullet to all the ills. Costco unionized employees are teamsters… Teamsters, ofcourse, are no strangers to scandals and corruption. Why, they are guilty of discrimination of their own - 
            http://workplacechoice.org/2011/11/23/worker-files-brief-defending-rights-in-teamster-union-discrimination-federal-appeal/

          • levp

            Except Costco suit was not certified as a class action (read further down on the same web site that you linked).
            And in the case you linked about Teamsters, they did exactly what they were supposed to do – fight for their members. I’d take Teamsters over nothing any time.

          • Anonymous

            Walmart suit was not “certified” as a class action, either. From the link you posted: ”
            in a 5-4 vote, the court concluded that the lawsuit did not satisfy requirements that the group of people in the class had questions of law or fact in common. ” So, again… What’s the difference? As for Teamsters fighting for their own, huh? They discriminated. That’s like saying that men discriminating against women is cool, cause, ya know, they are fighting for their own. Another lawsuit involving Teamsters (this time it’s sexual harassment) - 
            http://www.lvrj.com/news/teamsters-head-files-lawsuit-70173017.html and another - 
            http://www.wweek.com/portland/blog-26613-juicy_suits_former_teamsters_worker_says_union_fir.html

          • levp

            Agreed. In fact, Costco suit was not certified mostly *because* of Walmart decision. In Walmart case, a new amended suit has already been filed (in California).

            As for the Teamsters, “the union had approximately 1.4 million members in 2008″ http://en.wikipedia.org/wiki/Teamsters
            In any group of 1.4 million people there will be criminals (there are some even among Senators…) So what – the rest of the Senate still works for the state (some would argue that they are all criminals, but that is another conversation).

            The difference is that when having to make a choice, I pick better employer to give my business to:
            “The non-union locations have revisions to their Costco Employee Agreement every three years concurrent with union contract ratifications in locations with collective bargaining agreements. Similar to a union contract, the Employee Agreement sets forth such things as benefits, compensations, wages, disciplinary procedures, paid holidays, bonuses, and seniority. As of March 2011, non-supervisory hourly wages ranged from $11.00 to $21.00 in the United States. In the US, eighty-five percent of Costco’s workers have health insurance, compared with less than fifty percent at Walmart and Target.”

          • Anonymous

            Lev, ”
            In any group of 1.4 million people there will be criminals…” – fair enough. But why is the same consideration not extended to Walmart? If there is gender based discrimination, can’t we just write it off (as you just generously did with Teamsters) to policies of individuals and not the organization itself?

            As for the rest… I care about my own terms with my employer. If you have extra disposable income to financially show your care for the terms of others and that works for you – that’s great. As for myself, I’ll shop where I get the best value for my money.

          • levp

            We could have written off Walmart incidents, sure, unless there are so many of them as to form a pattern. But, of course, it is not just limited to Walmart (and yes, I will monitor that Costco lawsuit for the same reason), which reminds me to send in my donation to National Organization for Women…
            Morally and financially showing my care for the terms of others has indeed worked for me so far – I sleep at night really well. So we agree again!

          • Anonymous

            Well, obviously people should be doing what’s best for them. As for NOW – that organization has been heavily politicized and, essentially, has become an arm of DNC. Ofcourse, if supporting DNC works for you… You know the rest ;)

          • levp

            From “About NOW” page: ” NOW works to eliminate discrimination and harassment in the workplace, schools, the justice system, and all other sectors of society; secure abortion, birth control and reproductive rights for all women; end all forms of violence against women; eradicate racism, sexism and homophobia; and promote equality and justice in our society.” http://www.now.org/organization/info.html

            This seems to be the opposite of the Republican Party platform, so no surprise most of politicians endorsed by NOW are Democrats. However, they had endorsed Green Party candidates as well.

          • Anonymous

            Sure. But a more accurate name for them would National Organization of Liberal Women. They are more about promoting the dem policy than about standing up for all women. Again, it’s within their right to set their agenda, but let’s not pretend that they are an all encompassing umbrella organization for women.

          • levp

            OK, just like National Organization for Marriage does not speak for all married people.

          • Anonymous

            Right, that’s why it’s not “National Organization for Married People”.

          • levp

            Fine, let me re-phrase it: just like National Organization for Marriage does not speak for all marriages.

          • Anonymous

            I didn’t realize that marriages had a voice…

          • levp

            Everything Has A Voice

  • http://www.google.com/ F_a_b_a

    Cry me a river.
    At this point my work is borderline slavery. I get paid enough to survive till next months so I can make it to work on time and leave whenever work is done, which is never.
    For motivation we get: “At least you still got a job. If you don’t like what you get paid feel free to find another job but if we will find out you are looking we will fire you.”

    • MyBrooklyn.com

      You are absolutely right….thats the trend nowadays. You just have to do whats the best for you…anyway you can.

  • http://www.brucebrodinsky.com Bruce B

    Ain’t costing my  employer nuthin. I ain’t GOT no employer!

    here’s the story of my last job (not including dealing with my mother).

     i figured I’d save the company money, and give myself free time. I offered to go part-time, 3 days a week. They agreed.

    They agreed for 6 months. They then laid me off, then tried to rip me off on severance pay. For years I worked full time, but they tried to count me as part-time all the years I was employed there. I took the bastards to the EEOC, and got more money out of them. The EEOC lady said I should continue the suit, get more money, but I made my point, I’m not a suing type of guy.

     Oh, when they laid me off, they asked me to stay an additional 3 weeks (no, I can’t figure this out either), they needed me. I did, but after the severance rip-off, I was leaving at noon, what were they going to do, fire me.

      A couple of months later, they actually had the gall to call me up for help in solving a system crash. I’m too polite (I am in reality, no REALLY, I’m just an asshole on these boards), I just feigned ignorance (which is not difficult for me to pull off as you all know), sorry, couldn’t help them.

      The twists in the story are many. The poor guy who had to fire me, I actually was one of the people who interviewed him for his job, and he got the job partly due to my strong recommendation.  Poor guy was shaking, couldn’t look me in the eye when he did the dirty deed. He was a good guy, I knew he was just the messenger. I’m still in touch with him, hope to visit him in San Antonio where he ended up.

     See, I don’t hold grudges. I can’t. I can’t remember the day before yesterday usually.

       So that’s my gripe against THE MAN. Speaking of that, I like that old commercial where the executive announces “YEAH, STICK IT TO THE MAN”. Then he’s informed “but you ARE the man”….

       Thus ends my half-asleep post, which probably has nothing to do with the article, but what the heck. I give Ned enough hits on the site, I get to post these onces in awhile. Now back to Alfred Hitchcock Presents and Southern Comfort.

    • ES

      I always tell people that, when I was laid off from my last job, I shook the HR person’s hand and thanked her profusely. I was weirdly, if not altogether inappropriately, jubilant.

      • http://www.brucebrodinsky.com Bruce B

        I would have been happy too, if not for the severance ploy. I got mad at the poor HR woman who had to tell me. I later apologized to her. Like my boss, she was just a messenger.

  • Anonymous

    What’s the deal with missing “reply” buttons?