Cost of adding new Employee for a startup

For people getting into a business general way of calculating cost is cost of establishing infrastructure + employee salary and other day to day cost. They dont take to tender in other important aspects example addition of employees mean capability to process more business transactions. Which bring in other cost to business. Recently in discussion with another collegue let to working out metrics for calculating per employee/set addition cost to organization per month.

Now lets try to list down important functions for an organization

– Sales & marketing

– Technology

– HR

– Admin

– Accounts

Now lets analyze impact of addition of new employee to each function

Sales & Marketing – increase in cost to acquire more businesss to set off cost of hiring additional employee

Technology – cost of providing IT & Communication infrastructure like phone for making/recieving calls

HR – talk about microsoft advertisement on running people ready business. This is not only the payroll or salary but cost spent on training employee. Time given to settle down in organization and opportunity vs risk. Cost over 18 months to retain the employee with skill and careerpath vs other companies in segment.

Admin – Cost of having another employee may mean providing additional resources like space, lunch, transporation for employee, receptionist to manage if visitors make visit to staff

Accounts – Cost of processing additional business transactions in terms of account recievables collections and other account payables recieved.

Once all these above factors have been factored in only then can we really calculate the cost of addition of a new employee into organization.

More Information for starting up in india : Startup India 


1 Response to “Cost of adding new Employee for a startup”

  1. 1 Chandrashekhar Sharma October 20, 2011 at 1:47 pm

    I am agree with u but the thing is if u r capable to lots of work as u mentioned
    then y we need to keep 5 employees if 2 or 3 person can do such work
    My point is start-up is a big risk where any thing can happen either i won or loss so don’t you think its better to play safe game

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