Why is salary not the full employee cost?
Employers may also pay payroll taxes, unemployment insurance, workers' compensation, benefits, software, equipment, training, workspace, and other role-specific costs. Enter the rates and amounts that apply to the actual role and location.
What does contribution margin mean here?
It is the percentage of added revenue left after non-employee variable costs such as materials, fulfillment, payment fees, commissions, and shipping. Do not include the new employee cost inside that percentage because the calculator subtracts it separately.
How should I estimate added revenue?
Start with constrained demand the business cannot serve today, work the employee will directly deliver, or owner time that can be reassigned to proven sales activity. A general hope that a hire will create growth is not an evidence-backed revenue case.
Why protect a cash reserve?
A hire can be economically sound and still create a temporary cash draw. The reserve separates money available for the hiring plan from cash needed for payroll, tax, debt, slow collections, and other existing commitments. Use the separate cash-runway tool when timing is uneven or collections are uncertain.
Does this decide employee versus contractor status?
No. Worker classification depends on law and the facts of the working relationship, not a cost comparison or a label in a contract. Verify classification and employment requirements with qualified guidance before engaging the worker.
