Pay Roll: Two Ways to Conceive of Employee Cost

One of the hardest things to do, as a solo attorney, is to make your first hire in any category.  Even if you’ve hired an administrative assistant or paralegal before – a difficult hurdle to jump, in its own right – it’s still not easy to bring in an associate attorney, or a chief revenue officer.  Those are all different categories of role; so, it’s easy to get a little antsy making one of those hires, because the skill sets are different, and it’s tough to get a handle on what you should be expecting out of a job title you’ve never had any experience hiring for, or managing. 

 

You can research all you want; but, when the rubber meets the road, you’re the one who needs to determine whether someone is effective in a role – and, part of understanding that is lived experience.  There’s only one way to get that, of course.  So, it’s always a little bit of a leap of faith, when you hire a new employee type, for the first time. 

 

Of course, one of the concerns over bringing on new hires, is not just the potential for misunderstanding or misinterpreting the role – it’s also that it costs real money to hire someone.  Even if you have enough work for a new hire, and they’ll theoretically be able to bill for it right away, there’s some risk that that person won’t measure up to expectations.  The economic nature of a hire is a leap of faith, as well – because you often don’t know how quickly you’ll get to breakeven, if you do at all. 

 

Trying to figure out whether you can pay for a new hire definitely requires you to run the numbers first – though, that happens almost shockingly irregularly. 

 

But, there are still a couple of things that can psyche you out, even if you build the monetary use case for a new hire; and, it pays to be aware of them, as well: so you can settle yourself down, and make more reasonable decisions. 

 

The first thing to be cognizant of is that most lawyers hiring an employee for the first time immediately become overwhelmed by the salary – because they’re only looking at the big number, the annual payment.  But, if you break that number down to what you’re paying on a quarterly basis, or a monthly basis, or even a biweekly basis – which is actually reflective of when payroll goes out – and compare it to your overall revenue, all of a sudden: a salary becomes easier to swallow.  Not for nothing, that is also a more accurate representation of how those funds would pay out over time. 

 

The second item on the list is more about not getting over your skis, because the salary isn’t all you’re going to be paying out for a new hire.  With benefits and ancillary costs (including technology licenses and marketing expenses), your new hire is always going to cost you more than you expect – and, some of those expenses will not be predictable.  A good rule of thumb is to multiply the salary cost by 1.2x, to get closer to the real layout. 

 

If you’re interested in what the true cost of an employee is, you just got a little closer. 

 

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If you want to talk about your next hire, just reach out. 

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