Calculate Employees Cost Around The World

Wages, payroll taxes, time off, employee benefits—each of these helps you when calculating employee cost, so it’s important to factor these expenses into the budget before hiring someone.

You can calculate total employee costs in a few different ways. One of the most common and secure formulas though is somewhere between 1.25 and 1.4x their base salary.

To get a good estimation of an employee cost, check out our list of cost ratio numbers organized by regions below.

How to calculate employee costs around the world

To get a good overview of how much an employee will cost you after hiring, we created this list of employee cost ratios. The number is the ratio between the base salary and the total compensation and liabilities, and by multiplying it with the base salary you are expecting to pay your new recruit, you can get a good estimation for how much an employee will cost.

Here is an example:
Monthly base salary (45,000 pesos) X Ratio number (1.299) = Monthly cost (58455 pesos).

You can also use a Global employment cost calculator to help you figure out an employee’s overhead costs.

Factoring in gross annual salary into total employee costs

Gross annual salary is the total amount of money an employee earns in a year before withholding deductions. It’s the annualized version of the gross salary, which is a monthly figure. You can calculate gross annual salary in two ways:

1. 1. For salaried employees with fixed monthly earnings:
      Monthly gross salary x Number of pay periods in a year = Gross annual salary
   2. For employees paid hourly, daily, or weekly (no fixed monthly salary):
   • Calculate the total gross pay per pay period (hourly rate x hours worked per week = weekly pay).
   • Gross pay per period x the number of pay periods in a year

There are also additional considerations that can factor into annual gross pay such as bonuses and commissions or allowances.
In addition to gross annual salary, employees’ locations will dictate total employee costs as many countries have specific regulations around what companies must provide for each worker.

Mandatory added costs around the world 

When calculating overhead cost per employee, you’ll also need to factor in mandatory added costs. These’ll vary from country to country, but generally include:

• Healthcare programs
• Retirement, pensions, and social security plans
• Unemployment compensation
• Life insurance
• Disability protection
• PTO
• Illness days

Let’s look at a few mandatory costs from different countries.

In Indonesia, companies must pay 4% for health insurance, while businesses in New Zealand don’t need to pay for health insurance because it’s free or provided at a low cost by the government. Instead, New Zealand companies pay mandatory costs for pension (called KiwiSaver) and Accident Compensation Corporation.

Similarly, many countries like Norway don’t need to factor in social welfare mandatory costs (like healthcare or PTO), because by law, citizens get maternity and paternity leave, overtime, healthcare, and other benefits.

The US takes a different route. As healthcare is privatized, many companies offer maternity leave as a benefit because it’s not subsidized by the government. Whereas in European countries such as Spain, working citizens are legally entitled to maternity leave, so Spanish companies don’t need to pay a mandatory cost for that.

Aside from paying mandatory costs, employers sometimes provide employees with other benefits as well so they can hire the best talent.

Additional supplemental Benefits

To stay competitive and attract top employees, some employers will provide insurance plans, ongoing training materials, and work from home supplies. Here are a few examples of additional benefits:

• An unlimited leave policy
• Weekly meals in the office
• Student loan assistance
• Savings on or full coverage for gym subscriptions
• Flexible hours

Not only can the above supplemental benefits impact employee cost, aspects like location and performance can also factor into the equation.

What impacts employees’ cost?

Beyond benefits, it’ll cost your company more money based on various factors. Let’s go through some of them:

Location

Many companies offer location- or geo-based salaries to cover remote employee’s cost of living expenses, so if an employee lives in Idaho, for example, the company can pay them less than a team member living in New York City.

Industry 

If your company hires an investment banker, the employee will cost more than someone hired as a secretary.

Market conditions  

If demand for a profession is high relative to supply, you’ll pay more in employee compensation, but if there’s a lower demand for certain skills, cost per employee will drop.

Full-time vs part-time 

Most businesses hiring full-time employees will pay more towards the employee’s salary and benefits than someone only working part-time.

Education and Role  

The more of an expert an employee is in their field or role or the more education they have, the more companies may have to pay in employee benefits and compensation.

Performance

Employees that help your company make faster, more accurate decisions, increase operational efficiency, drive revenue, spot market trends while they’re hot, and can address issues that impact the business may have higher costs.

What is the average cost of benefits per employee?

The Bureau of Labor Statistics reported the average hourly rate business owners paid in employee benefits in June 2024 depends on the sector:

• $14.41 per hour for civilian workers
• $13.02 per hour for private industry workers
• $23.37 per hour for state and local government workers

For a 35-hour work week, the average monthly cost of employee benefits is:

• $2,185.51 for civilian workers
• $1,974.70 for private industry workers
• $3,544.45 for state and local government workers

Annual costs according to the average cost of employee benefits per year would amount to:

• $26,226.12 for civilian workers
• $23,696.40 for private industry workers
• $42,533.40 for state and local government workers

What is the true cost of losing an employee?

Employee costs also include losses from when an employee resigns or is terminated. When an employee leaves, it can cost one-half to two times the worker’s annual salary to replace them. Losing a team member includes costs such as: Advertising for the vacant position, onboarding the person who accepts the offer, and decreased productivity during the time the role was not filled. Additionally, companies may need to divert a portion of the budget towards hiring temporary workers or overtime pay to cover the workload.

Other factors that contribute to the cost of losing an employee include:

Impact on employee morale: Employees who see high turnover may feel demotivated and become less productive, which can affect team morale.

Errors: New employees take longer to get work done and may struggle solving issues at first.

Lost knowledge: When highly-skilled or longtime employees leave, organization loses their knowledge of the business and skill sets.

Cultural impact: Team dynamics can change when employees leave the company, altering the culture.

Global workforce management with experts

Just like you’d hire top talent for their expertise to impact your bottom line, you can reach new levels in your business with a platform specializing in global workforce management. Papaya Global can help your company manage your entire global workforce, from onboarding to ensuring safe cross-border payments. Scale fast, grow with ease, and adhere to all local and national laws with Papaya Global.