Our Program Manager, Cheryl Miki, details the process of payroll deductions in their final post in a three-part series exploring the hiring of new staff . For part 1, click here How do you Pay Them?, and for part 2, click here About Payroll.
Hiring New Staff Part 3:Budgeting for your New Hire
Working in the not-for-profit sector, we all wish we had more staff in our organizations. What a dream it would be to only have to do the work of one person instead of three or four. So let’s say you’re doing more than dreaming and want to figure out if you can afford new staff. How do you estimate the costs of a new hire?
There is more to the cost of an employee than just their wage or salary. (That reminds me… wages are what you pay staff who are paid by the hour, and salary is for full-time “work-til-the-job-is-done regardless of the hours” type of staff.) The employer also has CPP and EI expenses that roughly match the employee’s deductions. That’s right, BOTH the employer and the employee pay CPP and EI.
Let’s look at hourly staff first because they are a bit more complicated. The cost of an hourly worker is their hourly rate, plus holiday pay (4% in Manitoba, unless they’ve been working more than 5 years, and then it’s 6%), plus 4.95% CPP, plus 2.23% EI. Here’s an example of what it would cost your organization to have someone work for one hour at minimum wage:
1 hour x Manitoba minimum wage = $11.35
Add 4% holiday pay: $11.35 x .04 = .45
Add CPP cost: $11.80 x .0495 = .58
Add EI cost: $11.80 x .0223 = .26
For a total cost of $12.64 for one hour worked. This is the amount you want to use for budgeting purposes.
If you factor in the holiday pay, CPP and EI cost into your budget, you’ll have a much more realistic view of the cost of hiring someone new.
Salaried staff is calculated the same way, except that they aren’t paid the 4% holiday pay. That 4% is given instead as two weeks of paid vacation.
Well that’s the end of this series. I hope I was able to provide some insight regarding the hiring of new staff.
Check out my other blogs on the Artspace website under the Accounting section for other informative posts.