[patio11]

I'm not sure on the exact numbers, but in San Francisco a programmer probably costs you on average $100K a year in salary. With benefits the total cost is in the neighborhood of $120K. So a programmer is a $10K / month investment.

For what it's worth: assuming white-collar employees, the multiplier is typically 50% to 100% depending on your location and how generous you are with perks, rather than 20%. If you only have $120k available in the budget to hire someone, don't offer a salary higher than $80k, or you're going to have a very unfun meeting with your accountant saying "OK, would you prefer I took the money from somewhere else in the business, or do you want to go to prison for not paying our portion of the payroll taxes?"

There exist many folks who have more experience with San Francisco hiring than I have, but the word on the street for e.g. funded startups trying to pay market salaries is that you should be budgeting $15k~$20k a month to increase your team size by one.

[edanm]

Can you (or anyone) go into more detail on what the number "$100K yearly salary" includes and doesn't include, in the US? Helpful for those of us not in the US. I.e. what makes up that extra 50%-100%?

Our own multiplier (Israel) is usually 30% extra over the stated salary, although the salary here is usually stated as a monthly, not yearly, number.

[patio11]

The universal understanding of salary numbers among employees in the United States is that it is gross cash pay before deductions. We typically quote them annually for professional positions, and they're typically paid out in approximately equal bi-weekly installments, with a bit of variation for cash bonuses (which are common in some industries/locales and not in others).

The biweekly paycheck for someone with a $100k salary would thus be approximately $4,000 gross. It would list a deduction for payroll taxes, a deduction for anticipated federal and state income tax, a deduction for the employee's portion of health insurance, and perhaps some miscellaneous deductions for unemployment insurance premiums, automatic contribution to their retirement account, and what have you. This leaves them with net pay (probably in the $2,700 region or so but it's heavily sensitive to their family situation because that makes a huge difference in how much anticipated income tax is withheld) which is actually transferred to their account.

So all of that is included "within" the $100k yearly salary. What isn't, such that business owners have to model it separately?

1) Payroll taxes are typically divided half between employees and half between employers. For example, there's a ~14% levy on the first ~$100k in salary, for Social Security (primarily a form of compulsory retirement savings which the vast majority of working Americans are legally required to contribute to). ~7% is deducted from each paycheck for this (so ~$280 out of $4,000). An equivalent sum is contributed by the employer, without ever appearing on a paycheck. So the employee's real salary is actually about $107,000 but $7,000 disappears to taxes prior to the point where they're told the salary that they are going to be taxed on.

2) For historical reasons, the United States does not tax many forms of health insurance if provided as a perk to employees. The United States also historically did not have a national health insurance scheme. (We've got Obamacare these days but it doesn't meaningfully interact with the math for Valley engineers.) The combination of these two facts means that virtually all white collar employees expect to have employers fund fairly generous health insurance plans as an employment perk. The pricing for these gets a little weird, but you're in the right ballpark at about $10k to $20k per employee per year.

3) In addition to our national retirement savings program, we have "individual" retirement savings. These programs have substantial tax advantages. These are not compulsory, and can be funded by either an employee, an employer, or both. It is the common practice of most employers of engineers to fund these retirement accounts on a matching basis. The offer is at the company's discretion (up to a legal cap). A common offer is "We will match $2 of your contributions with $1 of our own money, up to a maximum match of 3% of your salary."

4) American engineers are commonly offered perks. Many are comparatively inexpensive when bought at company size -- free gym memberships for all employees, for example. Some are not exactly inexpensive -- free lunches and dinners on the company's premises daily, prepared by gourmet chefs, for example. Americans do not customarily include the implicit cost of perks in salary figures.

5) There's a bunch of business overhead that I haven't accounted for above (desks, prorated rent, computers, etc), but they're substantially the same as in Israel, so I won't belabor the point.

Anyhow: health care, taxes, and perks is what gets you to 50 to 100%.

[edanm]

Excellent! Thanks for the breakdown.

If anyone is interested, here in Israel we usually talk about the gross monthly salary, and we add around 25%-30% above that for the "true" employer cost.

Similar to the US system, but we usually don't include perks like gym membership when thinking of "employer costs". I think they're also less common, which might explain it. We do include the employer portion of the taxes, the employer portion of the pensions, potentially the employer portion of other savings accounts, and - unlike the US, I believe - one perk that is very common here is a company car, which is usually leased out to the employee.

[walshemj]

I was always told that for "standard" jobs 2x or 3x was the OH rate I did work for one world leading RnD organization that was well over 5x and heading towards 7x.

When the cost of the a single piece of equipment for a single experiment cost in excess of $5 million you can see why - in the end we did not go down that route. A pity as the ML neural networks aspects of machine vision would have looked very cool on my CV

[pbiggar]

For some anecdata, our multiplier is about 1.4 in SF.