As employer what % of what I charge needs to go to employee benefits / taxes etc...?

Question

I'm thinking about hiring employees even though I'm in business as sole proprietor. I plan to change to LLC when resources allow. Need to know how much % I should set aside for employee overhead costs. I have heard 15% and 25% and need to know before I enter into an agreement for aditional work that will require more help. If I pay said employee $15 hr. how much would I need to charge to cover state - fed amounts? I also plan on getting an accountant after I know this is in contract, and will be able to afford their service. If I'm not mistaken self employment taxes are around 15%, but does that rule hold true for employees, or is it more?

Answer 1

When you have an employee, you are required to file quarterly return for employment taxes for federal and state. State employment taxes depend upon your state. If you are going to have employees, your first requirement is to get EIN and state tax number.

Federal taxes.
From employee's paycheck you withhold
1. Social security tax at 6.2% for first $97,500 of wages
2. Medicare tax at 1.45% on all wages.
3. Federal income tax as per his W4 allowances.
Then you add equivalent social security tax and medicare tax (from employer's side) and send the entire amount as Federal employement taxes.
Then there is FUTA, which you normally make yearly payment.

State taxes depend upon your state.
For example in CA, ther are three taxes
Unemployment insurance UI at 3.4%
Employment tax ETT at 0.1% for first $7,000 of wages
State Disability Insurance at 0.6% for first $83,389 wages (max $500.33 per employee).

Answer 2

Well, the employer-employer relationship is gone anyway. But is the jewellery store a chain store (no pun intended haha)? Like are there many of these jewellery stores around? If so, she can get 'redeployed' into another branch, after she wins the case, just to solve all bitter-tie & resentment between the two involved. However, as it is privately owned, i doubt this guy has franchised his stores to dominate the jewellery market, as some stores do. Questions to ask; would your sister be willing to take the risk that he may/may not do this again, out of the blue? This would mean another problem coming anyway. Wouldn't there be feelings of bitterness and hostility between the two? This might be reflected in her work behaviour, and she may get fired for this too (for e.g. being too quiet or annoyed with customers). She will most likely win, as suspicion of something does not warrant deletion of pay... hope this helps :) Good luck.. I think she should quit and then take it to the courts :)

Answer 3

A lot depends on Worker's Comp insurance it can be almost nothing up to $7 an hour or more. 7.65% for SS .008 for federal unemployment, state unemployment about 5.4% other benefits you offer so you can pay for vacations, sick days, holidays and medical, life and disability or not depending if you can get people to work without benefits.

Answer 4

FICA tends to be around 17%, state withholding requirements and payroll taxes vary -- contact your local labor board or labor commissioner. You should also budget for workers compensation insurance and think about what benefits you want/need to offer and at what cost to you.