The hidden costs of employment

“The best minds in government? If any were, business would hire them away.” - Ronald Reagan

I highly recommend reading Why I'm Not Hiring by the president of a small company in NJ with 83 employees. In the article he breaks down the taxes and fees for his "median" employee, the one exactly in the middle of the payscale.

She makes $59,000 a year but before that money hits her bank, it is reduced by
-$2,376 for medical and dental insurance,
-   $126 for state unemployment insurance,
-   $149 for disability insurance and
-   $856 for Medicare.
-$1,893 in NJ income taxes. The federal government gets
-$3,661 for Social Security and 
-$6,250 for income tax withholding.
That's roughly $15,000 or 26% of her pay going to the government. [The math has been corrected. The article mistakenly says $13,000] Her take home pay is $44,000.

There are additional costs paid by the employer that don't appear in the paycheck:
-$9,561 for employee/spouse medical and dental,
-   $153 for life and other insurance,
-     $56 for federal unemployment coverage,
-   $149 for disability insurance,
-   $300 for workers' comp and
-   $505 for state unemployment insurance.
-   $856 for Medicare (employer's share) and
-$3,661 for Social Security (employer's share).

"When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. ... Governments impose a 33% surtax on Sally's job each year."

Bottom Line

"Because my company has been conscripted by the government and forced to serve as a tax collector [and insurance provider], we have lost control of a big chunk of our cost structure. Tax increases, whether cloaked as changes in unemployment or disability insurance, Medicare increases or in any other form can dramatically alter our financial situation."

The article goes on to explain that this year his insurance company is charging %28 more for a new plan with less coverage. That's the biggest increase ever and the NJ company will need to increase sales or increase prices to cover the cost. But neither option is likely during a recession.

"Only governments can raise prices repeatedly and pretend there will be no consequences."

So the only option for paying higher taxes and higher insurance rates is cost cutting where possible and cost control with a hiring freeze.