THE FINANCIAL IMPACT OF YOUR NEXT HIRE.
A new hire costs 30% to 50% more than the wage once payroll taxes, workers comp, and benefits are added, and the cash goes out weekly before the revenue they generate comes in. Before hiring, know the fully burdened cost and the break-even revenue that hire has to cover, or the addition quietly drains cash.
Hiring is the decision that most often turns a profitable subcontractor cash-negative, because the cost is larger and faster than it looks. The wage is only part of it. Payroll taxes, workers comp, and benefits add 30% to 50% on top, and that fully burdened cost goes out every week from day one, while the revenue the new person generates lags by the length of your billing and collection cycle. A hire who eventually pays for themselves can still create a cash hole in the first few months. This page explains the real cost of a hire, the break-even revenue it has to cover, and how to time it so it strengthens the business instead of straining it.
THE WAGE IS NOT THE COST.
The fully burdened cost of an employee is the wage plus payroll taxes, workers comp, and benefits, which together add 30% to 50% on top of the base. A field employee at $25 an hour is not a $25 cost; loaded, they are closer to $33 to $37 an hour. A $60,000 salary is closer to $80,000 to $90,000 once burdened.
On top of that sits the overhead the hire adds or absorbs: a truck, tools, a phone, software seats, supervision. The number that matters for the hiring decision is the fully burdened cost plus any overhead the role carries, not the wage on the offer letter.
COST NOW, REVENUE LATER.
The danger is not just the size of the cost; it is the timing. The fully burdened wage goes out weekly from the first day. The revenue the new person helps generate lags by your full billing and collection cycle, often 45 to 90 days. For the first one to three months, a hire is pure cash out.
A profitable business can go cash-negative on a hire it can easily afford over a year, simply because the cost lands now and the return lands later. That gap is what a 13-week cash flow forecast exists to show before you sign the offer.
THREE NUMBERS BEFORE YOU HIRE.
What the role actually costs per year.
Add the wage, payroll taxes, workers comp, and benefits, then any role-specific overhead, a truck, tools, software. That total, not the wage, is the annual commitment you are taking on. Underestimating it is the most common hiring mistake.
What the hire has to bring in to pay for itself.
Divide the fully burdened cost by your gross margin to find the revenue the hire must generate or enable just to break even. At a 25% gross margin, an $80,000 burdened hire needs to drive $320,000 of revenue to cover itself. Knowing that number tells you whether the work to support it exists.
Whether you can carry the gap.
Map the burdened cost against your cash position for the first 90 days, when the hire is cost-only. If a 13-week forecast shows the addition pushing the bank toward a tight week, time the hire to a stronger cash period or line up the work first. The hire may be affordable annually and still unaffordable this quarter.
HIRE ON NUMBERS, NOT ON FEELING.
A hire should follow the work and the cash, not precede them on a hunch. Know the fully burdened cost, the break-even revenue, and the 90-day cash impact before you make the offer, and a hire strengthens the business. Skip that math and a good year of hiring can quietly drain the cash that kept you alive.
The Construction CFO builds the burdened-cost and cash-forecast math into every hiring decision as part of CFOS for subcontractors doing $1M to $12M.
FREQUENTLY ASKED.
