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Beginners' guide to calculating personnel costs

Before you start looking for staff for your car wash, you have to calculate personnel costs. This is the only way you can keep track of what you need to spend on personnel – and that is important for the financial plan. We would like to give you an overview of the most important points.

This is how the personnel costs are made up

Employees only see what is on their pay slips. As an employer, you will find that this remuneration is not all there is to it. Personnel costs are made up of various factors. In addition to the remuneration for work, you also pay half of the social security contributions for your staff. These include additional personnel costs, as well as continued payment of wages during holidays, illness, public holidays, births, funerals or weddings. The company pension scheme also falls into this category, and if you decide to pay your employees a Christmas bonus, this is also included.

However, these are not all the sums that make up the personnel costs. There are also other personnel costs. These include everything you invest in training your employees, as well as payments for advertisements and interviews if you are looking for new employees. Also the price for the appropriate work clothes, which you make available to your employees, counts to the other personnel costs. You must therefore include all these factors in your calculation when calculating your personnel costs.

Note the minimum wage

You are not allowed to simply set the wages for your employees so low that your financial planning puts you on a cushy number. The minimum wage from 1 January 2019 in Germany is €9.19 – net. The more you pay, the less trouble you will have finding employees. Most people who work for the minimum wage leave their employer as soon as they have the prospect of a better paid job.

What is the difference between wages and salaries?

Some people use the terms wage and salary synonymously, but there is a big difference. A salary is when the staff receive a fixed monthly amount – regardless of whether they were on holiday during that month or were ill or whether there were many working days. In most cases, the salary for the whole year is specified in the contract, and the employee is paid one twelfth of this amount each month.

By contrast, wages are agreed in most cases for the hours worked and are paid on a weekly basis. The employee gets paid every hour they work, but no more. On public holidays or whilst on vacation, for example, they do not continue to receive money – unlike their colleagues who receive their salaries. In other words, the differences are considerable. Accordingly, you need to consider on what basis you would like to employ your staff before you can calculate your personnel costs. If you employ people on a wage basis, many of them will regard the job as temporary.

Tools are available with which you can calculate personnel costs

To find out how much you can pay your staff, you should first determine the actual hourly rate for the work. To do this, you divide the assumed annual personnel costs (which are made up of all the individual items mentioned above) by the real annual working hours (i.e. adjusted for holidays, sick leave and public holidays) and add a profit margin and a risk premium to the result. Not only does it sound complicated, it can also quickly lead you to lose track. This is why it is good that there are helpful tools with which you can calculate personnel costs. For example, you can use the personnel cost calculator for self-employed people, or you can decide to incur the financial expense of buying a cost planner that helps you to calculate your personnel costs amongst other things.

Summary: Personnel costs are often higher than initially assumed

If you are operating your car wash for the first time as an employer, you may be surprised by the results when you calculate your personnel costs. They are higher than many people initially assume. This is because they consist not only of gross pay and social security contributions, but also of many other items relating to personnel. At least, however, there are various tools that help you with the calculation, they list which points you still have to add to the invoice, gross up over the year and calculate down to the hour – depending on whether you want to determine an annual salary or an hourly wage.