Employer cost
Also known as: total employer cost, cost to employer, employment cost, cost of an employee, fully loaded cost
Employer cost is what it costs a company to employ one person: gross pay plus the employer's own mandatory contributions and the other costs of the job, such as benefits and equipment. It is higher than the gross salary in the contract and higher than the net pay the employee receives.
A salary offer has three numbers behind it. The net is what reaches the employee's bank account. The gross is the contract figure before the employee's tax and contributions. The employer cost is what the company actually pays, and it sits above the gross because many countries charge the employer its own contributions on top of the gross, for pension, social security, health or unemployment funds. Budgets, pricing and hiring decisions need the third number. Offer letters and job ads usually quote the second one.
What employer cost usually includes
- Gross pay: base salary, regular allowances, bonuses and overtime
- Employer social-security, pension, health or unemployment contributions, where the country charges them
- Employer-paid benefits such as insurance, meals, transport or a training budget
- Statutory extras such as a 13th-month payment, where the country or the contract requires one
- Equipment, software licenses and workspace for the role
- Hiring and onboarding costs, if you spread them over the first year
How to calculate it
Employer cost = gross pay + employer contributions + employer-paid benefits + other costs. Contribution rates differ by country, so take them from the tax authority of the country where the employee works. Example with a made-up flat employer contribution of 10%: a gross of 3,000 a month, contributions of 300 and benefits of 150 give 3,450 a month, or 41,400 a year.
Why gross, net and employer cost differ
The employee's deductions, income tax and the employee's share of contributions, come out of the gross and bring it down to net. Employer contributions are added on top of the gross and bring it up to employer cost. The same gross can therefore be a very different cost in two countries.