Krista wants to hire a new employee for her marketing firm but is trying to calculate how much this new hire will cost her. She is planning to pay the new employee a base salary of $40,000, which means that this new employee will actually cost her ______ once taxes and benefits are included
a. $42,000-$44,000
b. $60,000-$62,000
c. $50,000-$56,000
d. $75,000-$80,000
The answer is c. $50,000-$56,000.
This is because in addition to the base salary of $40,000, there will be additional costs such as employer taxes and benefits. These additional costs typically range from 25% to 40% of the base salary.
Therefore, the total cost to the employer will be approximately $50,000 to $56,000.
To calculate the total cost of the new hire, we need to consider taxes and benefits. Typically, benefits can range from 20% to 30% of the base salary.
Given that the base salary is $40,000, let's assume benefits are 25% of the base salary. So, benefits for this employee would cost $40,000 x 0.25 = $10,000.
Now, let's consider taxes. Tax rates can vary depending on the location and other factors, but let's assume a tax rate of 20%. So, the taxes on the base salary would be $40,000 x 0.20 = $8,000.
Adding the base salary, benefits, and taxes together, the total cost of the new employee would be $40,000 + $10,000 + $8,000 = $58,000.
Since the given answer options are ranges, the closest one that includes $58,000 is option c. So, the correct answer is c. $50,000-$56,000.
To calculate how much the new hire will cost Krista once taxes and benefits are included, we need to consider the additional expenses associated with employment. These typically include payroll taxes and benefits such as health insurance, retirement plans, and vacation time.
1. Payroll Taxes: Payroll taxes are mandatory contributions made by the employer for Social Security and Medicare. These taxes are typically a percentage of the employee's salary. As of 2021, the employer portion for Social Security is 6.2% and for Medicare is 1.45% of the employee's salary.
2. Benefits: Benefits can vary depending on the company's policies and the specific package offered. In this case, let's assume a standard benefit package, which includes health insurance, retirement contributions, and paid time off. It's common for employers to contribute around 15% to 20% of an employee's salary for benefits.
Now, let's calculate the additional expenses:
1. Payroll Taxes:
Social Security contribution: 6.2% of $40,000 = $2,480
Medicare contribution: 1.45% of $40,000 = $580
2. Benefits:
Benefit contribution: 15% to 20% of $40,000 = $6,000 to $8,000
Adding up all these costs, the range of how much the new hire will cost Krista once taxes and benefits are included is:
$40,000 (base salary) + $2,480 (Social Security taxes) + $580 (Medicare taxes) + $6,000 (benefits lower range) = $49,060
To determine the upper range, we can simply add the higher value for benefits, which gives:
$40,000 + $2,480 + $580 + $8,000 = $50,060
Therefore, the new employee will actually cost Krista between $49,060 (lower range) and $50,060 (upper range).
Therefore, the correct answer choice is c. $50,000-$56,000.