Salary and staff costs are often the largest expense in companies' accounts. Staff costs cover the costs associated with your employees and their employment. Often only a few factors are taken into account when the total staff costs are calculated, but staff costs also include, for example, recruitment, pensions and sickness absenteeism.
Here, we sum up the most common costs that must be included when you calculate your company's total staff costs.
What must be included in the company's staff costs?
A rule of thumb is that, in addition to the salary itself, staff costs amount to 35–54% of the expense, which you must include in the total staff costs.
Here, you can get an overview of some of the expenses you should include when you hire a new employee:
- Danish Labour Market Supplementary Pension (ATP)
- Travel expenses
- Christmas party
- Company car
- Company housing
- Internet and telephone
- Education and courses
- Holiday supplement
- Care days, extra holiday entitlements and annual leave – lack of productivity
Employees' salaries are part of your staff costs
Employees' salaries are the most significant cost – not just among staff costs, as the salary expense is often the largest expense in companies' accounts.
When you hire an employee, you negotiate the salary. But the employee is not paid the full salary, as some of the staff costs such as tax and pension are paid based on the salary rate. This calculation is typically carried out in connection with the preparation of payslips. It is your job as an employer to ensure that your employees' salary is calculated accurately so that they are paid the correct salary on time and you get the right ratio for staff costs.
So, what does the average wage earner cost?
It can be difficult to estimate the exact staff cost for a single employee. This can vary depending on the industry and employment conditions, but also due to unforeseen costs such as illness. Furthermore, there is the question about which costs to actually count as staff costs. Is recruitment a personnel or HR cost? Should administrative expenses such as rent and utilities be included? And should you already be considering future dismissal or resignation costs? Most staff costs are fixed, but they can fluctuate in size according to the circumstances of your company, and therefore it is an item that can make both small and large companies vulnerable. For this reason, you should pay extra attention when calculating your company's staff costs.
Can I reduce my staff costs?
According to the Danish Customs and Tax Administration, as an employer you can deduct expenses for wages and a number of benefits for staff if the expenses are directly linked to the operation of your company. For example, this applies to salary expenses and business trips – and in some cases also to health schemes. Therefore, it is important that you ensure that your accounts are optimised for tax so that you get full deduction of your staff costs. Do you need assistance or advice on tax?
You can also reduce staff costs by outsourcing tasks that are not part of your company's core service. For example, such tasks could be cleaning, canteen functions, payroll, accounting and HR.