Salaries - How much am I worth?

OR - How much do I cost?(Learn the lesson from this short slideshow in order to stand apart from the competition at

interview!!!)

Is it true to say that the cost an employer bears in order to

employ you is exactly the same a the amount of money as your

salary?

• NO!

• Have a guess how many more times than your salary it costs to employ you?

The cost to employ someone might be something in the order

of 1.5 times the value of the salary.

• In an interview, if you demonstrate to a prospective employer that you understand this, you should be better off than most competitors.

• The employer loses money unless you generate more income than you cost. So you need to generate at least 1.5 times your salary in order to be useful to the prospective employer

How do you work that out?

• The costs of any job will vary across industries and according to local market laws,

• however the following few slides will illustrate the principle of how an employee costs more than the relevant salary

Basic Salary (ignore extra benefits for the time being) = £30,000

• Costs to the employer:• £30,000• Employment tax (known in UK as National

insurance) = 12.8% of salary = £ 3,840• Holiday allowance (e.g. 20 days = 20/365 = 5.45%)

= £ 1,635 (5.45% of £ 30,000)• Public Holidays (e.g. 8 Days = 8/365 = 2.19%)

= £657• Pension (not compulsory, but often relevant, e.g.

6%) = £ 1,800• Running total of cost = £ 7,932

Other costs in any business that are likely to

be apportioned to individual members of staff: • Space to work (rent of offices, factory etc;

imagine 100 employees) E.g. £30,000 / 100 = £ 300

• Equipment, furniture etc £ 45,000 / 100 = £450• Heating, Lighting, Insurance - £ 50,000 / 100 =

£ 500• Internal support services (HR dept etc) £150,000 /

100 = £ 1,500• Training - (10% +/-? Of salary) = £ 3,000• Running total cost = £ 7,932 + £ 5,750 = £ 13,682

Running total of employment cost = £ 13,682

• So far the costs listed have been annual costs, but other, additional costs MIGHT need to be considered:

• Recruitment (Year 1 only) = e.g. 25% of salary = £ 7,500

• Maternity / Paternity leave = Variable costs!• Staff discounts, loans, allowances =

Variable costs!

So, in Year 1 of employment…..

• In this example, the cost to employ you on a salary of £ 30,000 per annum is at least £ 51,182 (£30,000 + £21,182)

• £ 51,182 is 1.7 times your £ 30,000 salary

• The employer loses money on any decision to recruit until they can recover at least £ 51,182?

• Use your time in the interview to demonstrate your understanding of this dilemma!

Commercial awareness?

• This analysis of employment costs is the sort of “insight” or thinking that marks a person out as being commercially aware.

• Recruitment, like any other business cost is undertaken in order to make money, not because a company want to be nice to the individual.

• Of course there are lots of other elements in any recruitment decision (personality fit, potential etc) but it is to your advantage if you demonstrate an understanding of the numbers behind the decision.