When determining whether or not a Virtual Assistant or Virtual Assistant team can help your business, one factor to take into consideration is financial: the cost of hiring an employee versus the cost of hiring a Virtual Assistant. Most entrepreneurs have little experience in hiring, being accustomed to running a one-person-show. Moreover, it can be a challenge to locate qualified, experienced talent that can confidently and reliably get up to speed on an entrepreneur's company or small business. However, a Virtual Assistant team already has the skills and talent in place ready to be used!
So what are the cost differences?
Social Security/FICA
In addition to an employee’s competitive hourly wage, there is Social Security/FICA to keep in mind. The Federal Insurance Contributions Act (FICA) creates a tax on payroll that requires employees and employer to fund Social Security and Medicare. Currently it is 6.2% that you as an employer will pay, over and above the employee's hourly wage.
Medicare
Medicare is a national health insurance program that currently taxes an employer 1.45% with no salary cap.
Unemployment/FUTA
Unemployment/Federal Unemployment Tax Act (FUTA) provides payment compensation for unemployed workers who have lost their jobs. The current percentage rate is 6.2% on $7,000 of salary.
Workers’ Compensation
Workers’ Compensation is a state-mandated insurance that provides wage replacement and medical benefits to employees that are injured or fall ill while on the job. The compensation premiums will vary depending upon the category of your employee. With Administrative, the current percentage is about 0.3% of salary. For Manufacturing it can be as high as 7.5% of salary.
Already, if you're considering a $20/hour employee, your total costs are all-in at around $24/hour. This is before payroll software, per-user fees, benefits, equipment & perks.
The costs for an employer at this point including a basic salary, employment taxes, and basic benefits are accepted to be around 1.4x the base salary range. This means that the cost range for an employee with a $50,000 per year salary might be more accurately recorded as $62,000 to $70,000! That’s a big difference!
...But that’s not all an employer needs to pay for! There will need to be additional, periodic costs for equipment upgrades and software purchases.
What are entrepreneurs and small business owners not accounting for?
After internal and external costs have been calculated, what is left to account for when it comes to hiring an employee? Most entrepreneurs have little experience in hiring employees, most significantly when it comes to recognizing the costs of searching for new employees to hire. Time spent while posting and maintaining job ad openings, training, and new employee turnover can eat away at valuable company attention and money.
In addition to the benefits, taxes, and paperwork a new employee may not provide the best results until they have been fully accommodated and settled in their new role...which could be for several months!
When an employer hires a Virtual Assistant team as an alternative to an employee, the savings and benefits can be incredibly valuable. Not only does an employer avoid the base salary, mandatory deductions, and additional costs but they have access to a team of individuals who are already prepared to handle the tasks they would have spent weeks training a new hire to do.
