How much does having you on the payroll really cost your employer?
You can thank or blame King Banaian for the brand new tool we're featuring today, in which we seek to answer that very question!
To answer the question, we're focusing on those things that represent the recurring cost of compensating you for your boss and those things that are required for all employers by law, such as all those taxes your employer has to pay just because you're on the payroll. Things like hiring you in the first place and training you to do your job aren't included, since these often reflect one-time only costs and can't really be counted at all as part of your compensation.
The tool will also not consider such factors as overtime pay and bonuses mainly for the sake of keeping things simple (it's complex enough already!) While these factors will influence things like how much your employer pays for its portion of Social Security and Medicare taxes, they don't influence things like your company's matching contribution to your 401(k) retirement plan or how much your health insurance would cost.
That said, our tool is designed to find out how much you actually cost your boss per hour, taking into account what benefits you may have and things like how big your company is and the state in which you work. Ideally, the tool will give you a good idea what your employer pays you beyond what you see on your paycheck:
Some Observations
The portion of your pay for actually working and the portion of your pay for time-off benefits will, when added together, equal the amount of your basic hourly pay.
For the lowest incomes, and particularly for small businesses, the administrative costs of actually processing the payroll and delivering your pay to you in the form of a check or by direct deposit to your bank can represent the largest component of expenses beyond your actual pay! We estimated these effective costs per hour for you based upon the prices listed by payroll processing firm Corporate Payroll Services, which we assume to be either competitive with or less than what your employer actually pays for these administrative expenses.
You may be absolutely amazed by the percentage of base pay represented by the non-visible portion of what your employer has to pay beyond your paycheck, especially if you earn the minimum wage in the U.S. and your employer provides health insurance for your family and you opt for the PPO option, which 60% of all employees covered by their employers do. We adjusted the average cost for each type of health insurance plan for each U.S. state based upon the relative percentage of health insurance costs in each state with respect to the U.S. national average using the data summarized by the Public Policy Institute of New York State.
We likewise used the average unemployment insurance tax rate per state and the average workers compensation tax rate per state as well in computing these figures. Workers compensation, in particular, can vary wildly based upon an individual's occupation in addition to varying by state. Meanwhile, the amount a company may pay in unemployment insurance taxes can vary based upon the age of the business, which we did not take into account. Here, new business typically pay higher rates. California provides a good example of this factor as it charges new employers a 3.4% tax rate before lowering it after three years. California's average unemployment insurance tax rate for employers is 0.91%.
Employers have an incentive to have their employees contribute to Health Care Flexible Spending Accounts, which they can use to reimburse their health expenses with pre-income tax dollars. Employers can reduce the amount of FICA taxes they pay in proportion to what their employee sets aside in this type of account.
Finally, the results our tool provides above only covers your contribution to your employer's cost of doing business! There's also the matter of what your boss pays for land, equipment, material, etc. in setting the threshold of what it takes for the business to actually be profitable!
Update 12 February 2008: Our thanks to a sharp-eyed reader who noticed that our calculation for the employer's cost of direct deposit was incorrect! It turned out that our code was simply missing a set of parentheses, which has now been fixed!
Labels: business, health care, paycheck, tool, wages, work
Uncle Sam wants you. More specifically, Uncle Sam wants what's in your wallet and we don't mean that Capital One card! No, he's after a good-sized portion of that paycheck of yours. That's why we've created the tool below to help you find out just what's left in your wallet after Uncle Sam has stripped it and you of many of your honestly earned dollars! And your dignity. And maybe even a bit of your desire to work to have an income in the first place.
Don't take it personally, because Uncle Sam doesn't really care enough about you to be out to get you. Unless you're holding out on him, that is! In which case, you can expect a visit from your friendly neighborhood IRS agent. Because politicians like U.S. Representative Dave Hobson (R) want to subsidize big corporations/political campaign contributors provide economic development funding for a new gas station and take-out restaurant to fund economic development in their districts, because the projects will be named after them and they will get more campaign contributions *they* care (HT: Captain's Quarters).
That could be worse. Hobson is a piker compared to such pork-barrel politicians economic development experts such as U.S. Representative Jack Murtha (D), who often has the problem of his closest colleagues not even knowing if the organizations he seeks to fund even exist, much less being able to demonstrate if any of the projects funded by the hand-selected recipients of the money from your wallet are truly effective at achieving their stated goals (HT: Democracy Project).
We could go on. We really could. But we need to get onto the business of figuring out how much of your paycheck will be left after politicians like these are done showing how much they really care. Just enter the basic data indicated below and we'll work out how much the federal government will be extracting directly from each one of your paychecks in 2008!
Update (1 January 2009): The 2009 version of this tool is now online!
Now that you've seen your bottom line, at least through the federal level, does that make the government's spending on things like this seem like a really good way of putting your hard earned dollars to work for the public good? Remember, as far as professional politicians, government bureaucrats and political lobbyists are concerned, you're not paying "taxes", you're making valuable "contributions" and "investments" for which you really need to show them some gratitude! Maybe by letting them put their names on the boondoggles projects they fund....
Elsewhere on the Web
There are other paycheck calculators like this on the Internet, including the superior tools available at PaycheckCity.com. We really like PaycheckCity's tools because they allow you to determine the amount of state income tax withholding that will be taken out of your paycheck as well as what the federal government extracts.
Then again, if you live in one of the nine states that have no personal income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington or Wyoming), our 2008 Paycheck Estimator will provide you with a very good estimate of your actual take-home pay.
About the 2008 Paycheck Estimator
Political Calculations' 2008 Paycheck Estimator will determine the amount of U.S. Federal Income, Social Security and Medicare taxes to be withheld for wages and salaries earned in 2008, as determined through the percentage method outlined in the IRS's Employer's Tax Guide (Publication 15 Circular E, which is available online.)
The paycheck estimator also takes into account the amount of pre-tax 401(k) or 403(b) plan contributions you make as well as your pre-tax flexible spending account contributions for health care and dependent care expenses before figuring the amount of taxes to withhold.
Political Calculations' 2008 Paycheck Estimator will also determine the net amount of pay left over after all these adjustments to your basic income. And the best part: if you get a raise, you can even see how much more money that will mean to you each pay period - to the best of our knowledge, this is still the only paycheck estimating tool on the web that can do this for you!
Go ahead - give yourself a raise today!
Previously on Political Calculations
Update 8 January 2008: Hold the phone! Before you go any further, you should know that we've created a 2008 version of this tool. Why? Because 2007 is so last year!...
It's a brand new year, and that can only mean one thing: it's time to figure out how much money the U.S. government will be taking away from you and whether you'll be able to make ends meet on the amount remaining in your regular paycheck!
Sure, you could actually *wait* to get your first paycheck of the year and find out the hard way, but what if this is also the year that you've cranked up your 401(k) contributions? What if 2007 is when you start taking advantage of Flexible Spending Accounts for your expected medical and child care expenses? And what if you get a raise sometime during the year? What will any of these things do to your take-home pay?
Answering questions like these is exactly why we've created the 2007 Paycheck Estimator. Our 2007 tool will help you find out not only how much of your paycheck will be left after Uncle Sam's goon squad gets his piece of your paycheck, but also how much you'll have left after the stuff you voluntarily choose to do!
Just enter your basic paycheck information into the tool below, and our tool will do the math! You can even estimate how much you'll pay over the course of 2007 by selecting "Annually" as your Pay Period. And for real fun, get out your imaginary checkbook and write imaginary checks for all the line items in the results below!
There are other paycheck calculators like this on the Internet, including the superior tools available at PaycheckCity.com, which allow you to determine the amount of state income tax withholding that will be taken out of your paycheck as well. Then again, if you live in one of the nine states that have no personal income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington or Wyoming), our 2007 Paycheck Estimator will provide you with a very good estimate of your actual take-home pay.
And now that you've seen your bottom line (at least through the federal level), does that make the government's spending on things like this seem like a really good way of putting your hard earned dollars to work for the public good? Remember, as far as professional politicians, government bureaucrats and political lobbyists are concerned, they're not "taxes", they're "contributions" and "investments" for which you really need to show them some gratitude!
About the 2007 Paycheck Estimator
Political Calculations' 2007 Paycheck Estimator will determine the amount of U.S. Federal Income, Social Security and Medicare taxes to be withheld for wages and salaries earned in 2007, as determined through the percentage method outlined in the IRS's Employer's Tax Guide (Publication 15 Circular E, which is available online.)
The paycheck estimator also takes into account the amount of pre-tax 401(k) or 403(b) plan contributions you make as well as your pre-tax flexible spending account contributions for health care and dependent care expenses before figuring the amount of taxes to withhold.
Political Calculations' 2007 Paycheck Estimator will also determine the net amount of pay left over after all these adjustments to your basic income. And the best part: if you get a raise, you can even see how much more money that will mean to you each pay period - to the best of our knowledge, this is the only paycheck estimating tool on the web that can do this for you!
Previously on Political Calculations
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
Thanks in advance!
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