Video: How to Calculate Employee Cost

This video provides a framework for accurately calculating the cost of a business’s international workforce.

There are five elements to take into account when calculating the overall cost of an employee:

• Gross annual pay
• Payroll taxes
• Onboarding and recruiting costs
• Statutory benefits
• Tax considerations

Determining how to calculate employee cost for a global team can be a heavy lift for internal HR teams.

Hi. I’m Ashley with Velocity Global. In this video, will walk you through everything you need to know so you can accurately forecast the cost of your international workforce.

There are five key factors that determine the overall cost of your employee.

Step 1: gross annual pay

The first step in calculating employee cost is determining gross annual pay for each team member. This includes base salary and any bonuses, commissions, or allowances they receive.

Make sure to account for salary adjustments, promotions, and currency conversions if you’re dealing with multiple currencies within your team.

Step 2: payroll taxes

Next, calculate payroll taxes, income tax, social security, and other mandatory deductions.

The tax landscape can vary quite a bit from country to country, so it’s crucial to stay up to date on local tax laws and rates to ensure your calculations are accurate.

Step 3: onboarding and recruiting costs

Third, factor in your onboarding and recruitment costs. This includes expenses for job postings, recruitment agencies, background checks, and relocation packages.

Step 4: statutory benefits

Fourth is statutory benefits.

Mandated benefits vary significantly from country to country. Common mandated benefits include health insurance, retirement plans, and paid leave. This is another area where it’s important to know the local labor laws and regulations to ensure accurate calculations.

Step 5: taxes

Tax considerations are critical as employers often are responsible for withholding and remitting taxes on behalf of their employees. Employees may also have tax obligations that you need to be aware of. Ensure that you’re familiar with tax treaties, double taxation agreements, and any tax-saving options for your international team members.

Now, let’s explore how hiring a distributed team can help reduce costs.

Hiring a distributed team for cost efficiency

Going global can provide access to cost-effective talent and hiring in regions with lower living costs can lead to significant savings in terms of salary expenses.

Distributed teams offer more flexibility, allowing you to tap into a much bigger global talent pool. With a distributed team, you can minimize expenses related to office space, utilities, and equipment.

Say goodbye to geographic boundaries and hire the right talent at the right price, no matter their location.

Finally, a distributed team can quickly adapt to changing business needs, scaling up or down as needed without the costs associated with traditional hiring and onboarding.

We hope this video helps you accurately forecast costs for your international hiring strategy. Calculating the cost of your international team is no small feat, but hiring a distributed team is a strategic move that can reduce employee costs while granting access to a humongous global talent pool.