Staffing Direct Cost of Labor Calculator
What are Temporary Staffing Direct Costs?
Temporary staffing direct costs are the expenses directly associated with employing and placing temporary workers. Staffing companies must understand and manage these costs as they directly impact profitability and pricing strategies.
Calculate Your Temp Staffing Direct Cost Burden Rate
You can easily calculate the direct labor cost rate for your temporary staffing company using our calculator. This tool is specifically designed to assist staffing companies in accurately determining the total direct cost rate per hour for their temporary workers, taking into account various taxes and other direct costs.
Required Input
To use this calculator effectively, you will need to provide the following input:
Workers Compensation Rate (%): This is the percentage of the employee’s wages paid for workers’ compensation insurance. It covers medical expenses and lost wages for employees injured or sick due to work-related causes. You can obtain the Worker’s Compensation Rate from your company’s insurance policy or provider. The rate can vary based on the nature of the work and the associated risk.
Employer Share FICA Tax (%): This includes the Social Security and Medicare taxes employers must pay for their employees. Later in this article, you will find additional information regarding the FICA tax calculation.
Federal Unemployment Tax (FUTA) (%): This tax provides unemployment compensation to workers who have lost their jobs. The next section provides more information.
State Unemployment Tax (SUTA) (%): This tax rate varies by state and is used to provide unemployment benefits to eligible workers. Each state sets its own SUTA rate and wage base. You can find the SUTA rate on your state’s Department of Labor website or by contacting your state unemployment tax agency. Your payroll service provider can also provide this information.
Other Direct Costs (%): This includes any additional direct costs related to hiring and maintaining the temporary worker, such as vendor management system (VMS), payroll processing, company benefits (if any are provided), and other employee-related expenses.
Direct Costs of Labor Rate Calculator (Taxes & Other Costs)
Calculate the Total Direct Cost Amount per Hour (Pay Rate + Direct Cost Burden)
Required Input
Direct Cost Burden Rate: You need to calculate the Direct Cost Burden Rate using the calculator provided above before using this tool. This calculator will take the result from the previous calculator as input.
Pay Rate ($/hour): The hourly wage paid to temporary workers.
Total Direct Cost Per Hour Calculator
Additional Information Regarding FICA & FUTA Tax Rates
DISCLAIMER: It is crucial to seek advice from a qualified tax accountant before making any significant tax decisions. The information provided in this article is for informational purposes only. Please be aware that the rates and limits stated were accurate at the time of the article’s latest update, but they may have changed.
Social Security and Medicare Rate (FICA)
The Federal Insurance Contributions Act (FICA) tax rate the company pays are:
- Social Security Tax:
- Rate: 6.2% of gross wages.
- Wage Base Limit: 2024 The wage base limit is $168,600. This means the 6.2% tax is applied to the first $168,600 of an employee’s earnings. Earnings above this amount are not subject to the Social Security tax.
- Medicare Tax:
- Rate: 1.45% of gross wages.
- No Wage Base Limit: Unlike Social Security, Medicare tax has no wage base limit. This means the 1.45% tax is applied to all employee earnings.
- Additional Medicare Tax: An additional Medicare tax of 0.9% on wages over $200,000 for single filers, $250,000 for married couples filing jointly, and $125,000 for married individuals filing separately.
The federal government sets the FICA tax rates, which can be found on the IRS website or through your payroll service provider.
Federal Unemployment Tax (FUTA)
The Federal Unemployment Tax Act (FUTA) tax funds state workforce agencies. Employers are responsible for paying this tax; it is not deducted from employees’ wages. Here’s how FUTA works:
- FUTA Tax Rate:
- The standard FUTA tax rate is 6.0% on the first $7,000 of annual wages paid to each employee.
- Credit Reduction:
- Employers can receive a credit of up to 5.4% if they pay their state unemployment taxes on time, which reduces the effective FUTA tax rate to 0.6%.
- This means that most employers’ effective FUTA tax rate is 0.6% if they qualify for the maximum credit.
The federal government sets the FUTA tax rate, which can be found on the IRS website or through your payroll service provider.