Tips & Tricks

What is the Real Cost of Hiring an Employee?

By Kristin Tyler
February 19, 2019

Hiring a new employee is a big decision especially if it’s a new position and not a replacement hire. Before you go down that path, it’s important to understand the real cost of adding a new employee and the impact it may have on your overhead. Here are some expenses you may not have considered:

Recruiting expenses. If you are going to be using a recruiter or employment agency, there can be steep fees. Even if you are doing it yourself, you should factor in the costs of posting the job as well as the time involved in reviewing applications, conducting interviews and doing reference and background checks.

Going rate salary. If you are not sure what you should be paying an employee, you can do online research. The Labor Department and industry groups often publish salary information as do websites like Glassdoor. In addition, ask colleagues for feedback.

Employment taxes. As an employer, you are responsible for paying your share of Social Security/FICA, Unemployment/FUTA, State Unemployment and Medicare taxes, in addition to Workers’ Compensation premiums.

Professional dues and insurance.  When hiring a new attorney, a significant part of the overhead relates to professional dues and malpractice insurance.  Annual state bar dues, local bar association dues certainly vary from state to state but will account for several hundred if not thousands of dollars per year.  There is also the cost of paying for the required continuing legal education courses each year.  The cost for additional malpractice insurance coverage can also add several thousand dollars to the overhead of your practice.   

Benefits. Most benefits are not required by law, but they are still a good practice in order to attract and retain employees. The cost of health insurance, life insurance, disability, 401K, etc. quickly adds up. In addition, vacation, sick and family leave time should be considered even if they are not paid out in cash because of lost productivity as other employees fill in for the absent employee.

Space. Employees take up space (unless they work remotely) so you should consider the costs for additional square footage, furniture, office equipment, Internet, software, phone lines, electricity, and organizational costs of payroll and keeping data.

The combination of these costs can have a significant impact on a law firm’s budget. Accordingly, firms should be sure that they have enough long-term work to support hiring someone on a full-time or part-time basis. In addition, the work the employee will be doing must be valuable enough to offset the cost. If the economics of a new hire don’t make sense, firms should consider using freelancers instead. Outsourcing allows a law firm to handle existing or new work on an as needed basis, while evaluating whether an employee should be hired.

If your firm needs help with legal work, using a qualified freelance lawyer can be a great solution to increase your productivity without adding to your overhead. LAWCLERK™ provides a secure and confidential online legal services marketplace where you can look for attorneys with the right skill set and the right price for your matter.

Learn more about how LAWCLERK™ works or contact us for a consultation today. 

For more information on how much an employee costs, check out this fact sheet from the US Bureau of Labor Statistics.

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