Hiring Affordability Calculator – Can You Afford to Hire?
Free Hiring Affordability Calculator. Find out if hiring an employee is safe, risky, or not affordable for your business.
Hiring Affordability Calculator – Can You Afford to Hire?
Free Hiring Affordability Calculator. Find out if hiring an employee is safe, risky, or not affordable for your business.
Generated: 2/22/2026, 12:35:43 AM | AskSMB.io
Hiring Affordability Calculator
Make data-driven hiring decisions. Find out if bringing on a new employee is safe, risky, or beyond your current budget.
Inputs
Gross annual salary for the new hire
Taxes, insurance, benefits as % of salary (typically 20-30%)
Net profit per month before hiring
Expected monthly growth after hiring (optional)
Results
Employee salary must be greater than zero
How the Hiring Affordability Calculator Works
Why Hiring Too Early Is Dangerous
Premature hiring is one of the top killers of small businesses and startups. When you hire before your business can sustain the cost, you trigger a cash burn spiral that's hard to escape:
- Cash depletion accelerates: Fixed payroll drains your runway faster than variable costs
- Pressure for quick wins: You make desperate decisions to justify the hire
- Quality of work suffers: You can't afford training time or mistakes
- Morale damage from layoffs: If you have to let them go, team trust is destroyed
- Missed opportunities: Money spent on the wrong hire could have funded critical growth initiatives
Many founders hire "for growth" but end up burning through their runway before the growth materializes. This calculator forces you to face the math before making an emotional decision.
The True Cost of an Employee (Beyond Salary)
First-time employers often drastically underestimate the total cost of hiring. A $60,000 salary doesn't cost $60,000—it costs $72,000-$85,000+ when you include:
| Cost Component | % of Salary |
|---|---|
| Base Salary | 100% |
| Employer FICA/Medicare | 7.65% |
| Unemployment Insurance | 0.6-6% |
| Workers Compensation | 1-10% |
| Health Insurance | 10-25% |
| 401(k) Match | 3-6% |
| PTO / Sick Days | 8-15% |
| Total Burden | 30-60% above salary |
This calculator uses a default 20% burden rate, but verify your actual costs. Some industries (construction, manufacturing) have much higher workers comp rates. Healthcare benefits can easily add $15,000-$20,000 per employee annually.
The 20% Profit Buffer Rule
This calculator considers a hire "safe" if you retain at least 20% of your current profit after paying for the new employee. Why 20%?
- ✓Bad months happen: Revenue fluctuates. A 20% buffer absorbs a rough month without going negative.
- ✓Unexpected costs: Equipment breaks, software subscriptions add up, legal fees emerge.
- ✓Ramp-up time: New hires take 3-6 months to become fully productive. You need cushion during this period.
- ✓Growth investment: You should still have money left to invest in marketing, product, or infrastructure.
- ✓Psychological safety: Operating at 90%+ of capacity is stressful and leads to burnout and poor decisions.
If you're below the 20% threshold, the calculator flags the hire as "risky." You can still proceed, but you need contingency plans: line of credit, ability to cut other costs, strong revenue pipeline.
When Growth Justifies Hiring
Sometimes hiring before you have the full profit buffer makes sense—if growth is strong and the hire directly enables more revenue. The calculator accounts for this with the "Revenue Growth (%)" field.
A hire is considered "safe" even with a thinner profit buffer if projected growth will offset 80%+ of hiring costs within 6 months. This recognizes scenarios like:
- Sales rep with a track record: They've closed $50k/month at prior companies; your product is similar
- Engineer to ship a key feature: Customers are waiting for it and have verbally committed to upgrades
- Customer success manager: You're losing customers due to lack of support; hire will reduce churn
- Operations hire: You're personally doing $10/hr tasks; freeing your time lets you close $50k deals
Critical: Only enter growth rates you have strong evidence for. "We'll grow faster with this hire" is hope, not a plan. "We have $200k in stalled deals that need a dedicated sales rep" is evidence.
Signs You Should Delay Hiring
If any of these are true, wait 2-3 months before hiring:
- ⚠Less than 6 months runway: Hiring will shorten it to 3-4 months, leaving no margin for error
- ⚠No clear job description: If you can't articulate exactly what they'll do for 40 hours/week, you're not ready
- ⚠Revenue is flat or declining: Hiring won't fix a broken business model
- ⚠You're hiring to "look legit": Emotional hiring leads to bad hires
- ⚠No management experience: Managing your first employee is hard; do it when you have breathing room
- ⚠Task could be automated or outsourced: $5k for a contractor beats $70k for an employee
Delaying a hire by 60 days to build more profit is almost always the right move. That extra cash gives you negotiating power, reduces hiring pressure, and ensures you can afford mistakes.
Example Calculation
Let's walk through a real-world example:
Scenario
Calculation
Monthly Salary = $60,000 ÷ 12 = $5,000
Payroll Cost = $5,000 × 20% = $1,000
Total Monthly Hiring Cost = $6,000
Profit After Hiring = $8,000 - $6,000 = $2,000
Profit Buffer = $2,000 ÷ $8,000 = 25%
Decision
🟡 Risky – Proceed With Caution
You'll retain 25% of current profit (above the 20% safe threshold), but it's tight. One bad month or unexpected expense could push you into losses. The 5% monthly growth helps, but isn't guaranteed. Consider: (1) Negotiating salary to $50k, or (2) Waiting 2 months to build profit to $10k/month, or (3) Hiring part-time first.
Frequently Asked Questions
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💡 Quick Tips
- •All calculations happen in your browser - your data is private
- •Results update in real-time as you type
- •Export to PDF or share via link
- •No sign-up required