Employee costs include more than hourly pay.
All businesses that have paid workers, whether they are manufacturing companies or professional sports teams, have to monitor their salary costs. Two very different indicators of what it costs the company to do business are salary loads and salary burdens. Each is used for a different purpose, but together they inform business owners about the company's bottom line.
Salary Load
A salary load is simply the aggregate total of each gross salary for every single employee in a company, from the president down to the mail room clerk. The salary load gives a business owner a quick helicopter view of how much of the company's budget is being spent on salaries. The figure is also a quick way for a company to compare itself with competitors. Professional sports teams often compare themselves with each other in terms of their salary loads.
Salary Burden
A company's salary burden is a much more complicated figure. It is comprised of any costs the company must incur, not including an employee's gross salary, in order for him to do his job. For instance, in order for a full-time janitor to do his job, there is not only his gross salary, but the company also has to pay his health insurance, payroll taxes, paid vacation, training, personal time, cleaning equipment and supplies. The salary burden is an accurate figure of what it costs the company to have a productive staff.
Calculate a Burden Rate
Any company wants its staff to be productive. Human resources departments often calculate a company or employee burden rate in order to monitor over time whether the company is spending money wisely in comparison with how much money it spends on its salary load.
A burden rate is calculated simply by taking an employee's burden cost and dividing it by the employee's gross salary. For example, if a company must spend $60,000 for an employee to be productive and that employee earns a gross salary of $100,000, then the employee's burden rate is 60 percent -- $60,000 divided by $100,000. A relatively high burden rate can be worth it if the employee in question makes a lot of money for the company. But a business might consider other options if a low-producing employee has a high burden rate.
Considerations
Many companies try to limit or deny employees any overtime work since they have to pay the employee an extra 50 percent of wage per overtime hour. On the other hand, overtime hours usually incur a smaller additional salary burden. For instance, if an employee is given benefits like health insurance, those benefits cost the same whether the employee works 40 hours or 60. It might be that an employee's burden rate goes significantly down during overtime hours, and therefore it might be more cost-effective for the company to offer overtime work to some of its employees.
Tags: burden rate, gross salary, employee burden, costs company, employee burden rate, company business, company must
