The Real Cost of Hiring Full-Time Staff in 2025: A Small Business Breakdown

You know that moment when you realize you can't do it all yourself anymore?

For most small business owners, it hits around 2 AM on a Tuesday. You're responding to customer emails that came in during dinner. Your calendar is so packed you're eating lunch in your car. Lead follow-up is slipping through the cracks because there literally aren't enough hours in the day.

The solution seems obvious: hire someone.

Except it's not that simple. And it's definitely not as cheap as you think.

Let me show you what hiring a full-time employee actually costs in 2025, because the salary is just the beginning.

Quick Answer
Hiring a full-time employee in 2025 typically costs 1.6 to 2.1 times their base salary when you factor in taxes, benefits, equipment, training, management overhead, and turnover — making a virtual assistant often a far cheaper and more flexible alternative for many small businesses.

Most small business owners budget for base salary only. Reality check: once you add payroll taxes, health insurance, paid time off, workers’ compensation, equipment, software licenses, onboarding/training, management time, and inevitable turnover — the real first-year cost of an admin priced at $40,000 can hit $80,000+. That’s before you account for lost productivity during training, hiring new staff when someone quits (which happens often in admin roles), or compliance risks. Meanwhile, a VA (or hybrid VA solution) can deliver similar support (emails, scheduling, admin work) at a fraction of the cost — roughly $18,000/year for 20 hrs/week — with none of the overhead or long-term commitment.

Key Takeaways

• Base salary is just the start: real cost includes taxes, benefits, time off, insurance, tools, training, and management overhead.

• First-year real cost of a “$40,000” admin can double when all extras are counted.

• For many small businesses, a VA or part-time support replaces the need for a full-time admin at a much lower cost, with greater flexibility and lower risk.

FAQ
Q: Why is the true cost of a full-time employee so much higher than base salary?
A: Because overhead — taxes, insurance, benefits, equipment, workspace, training, and management — adds up fast.

Q: When does hiring full-time staff make sense over a VA?
A: When you need consistent 35+ hours/week, specialized roles requiring deep institutional knowledge, or building a local team culture.

What Everyone Gets Wrong About Hiring Costs

Ask most business owners what it costs to hire an administrative assistant making $40,000 a year, and they'll say... $40,000.

Wrong.

Try $56,000 to $62,000. And that's before things go sideways.

I learned this the hard way. Three years ago, I hired my first full-time admin. Posted the job, interviewed candidates, made an offer. She accepted at $42,000 annually. I thought I'd budgeted correctly.

Four months later, I was staring at my QuickBooks wondering where an extra $8,000 had gone. Payroll taxes I hadn't properly calculated. Health insurance that cost way more than the "estimates" I'd seen online. The software licenses she needed. The desk, computer, and phone. The two weeks I spent training her instead of doing revenue-generating work.

Then she quit after seven months. I had to start over.

That's when I actually sat down and calculated what hiring really costs. The number made me nauseous.

The Real Numbers: Full-Time Employee Cost Breakdown

Let's walk through this with a real example. You're hiring an administrative assistant at $40,000 per year. Seems reasonable, right? Here's what you're actually signing up for.

Base Salary: $40,000

This is the number in the job posting. The number candidates see. The number you think you're paying.

But this is just the foundation. Everything else stacks on top.

Payroll Taxes: $3,060 minimum

Here's what most small business owners forget: you don't just pay your employee's salary. You pay taxes on their salary.

Social Security tax? You're paying 6.2% of their wages, up to the wage base limit. That's $2,480 per year on a $40,000 salary.

Medicare tax? Another 1.45%. That's $580 annually.

Federal unemployment tax (FUTA)? That's 6% on the first $7,000 of wages, though most employers get a credit that brings it to 0.6%. So add $42.

State unemployment tax (SUTA) varies wildly by state and your experience rating, but expect anywhere from $280 to $1,400 annually.

And we haven't even talked about state-specific taxes. Some states have additional payroll taxes, disability insurance requirements, or paid family leave contributions.

So your actual payroll tax burden? Anywhere from $3,060 to $4,500 depending on your state and circumstances.

Health Insurance: $7,800 to $10,400

In 2025, the average employer contribution for single coverage health insurance is around $650 to $870 per month. That's if you're getting group rates and your employee doesn't have a family.

Have dependents? Family coverage averages $1,500 to $2,000 monthly in employer contributions.

"But I'll just offer a health insurance stipend," you might be thinking. Cool. That's still $400 to $600 monthly out of your pocket if you want to be competitive.

And here's the thing: in many states, if you offer health insurance to one employee, you have to offer it to all eligible employees under the same terms. So that cost multiplies as you grow.

Let's use the conservative single-coverage number: $7,800 annually.

Paid Time Off: $3,077

Two weeks of vacation is pretty standard. That's 80 hours of time you're paying for when no work is being done.

At $40,000 annually, that's roughly $19.23 per hour (accounting for a 2,080-hour work year). So 80 hours of PTO costs you $1,538.

But wait, there's more. Federal holidays? Most companies give 6 to 10 days. Let's say 8. That's another 64 hours, or $1,231.

Sick days? If you're in a state with required sick leave (and many now have this), that's another 40 to 56 hours minimum. Let's call it 40 hours, or $769.

Total paid time off you're funding: $3,077.

And this assumes your employee doesn't take all their sick days, doesn't get jury duty, and doesn't have any major life events requiring leave.

Workers' Compensation Insurance: $400 to $1,200

This varies dramatically by state and industry. Office workers are cheap to insure. If you're in construction or a high-risk field, multiply these numbers by 3 or 4.

For a standard administrative role, expect $400 to $1,200 annually. Let's split the difference: $800.

Equipment and Supplies: $2,500 to $4,000 (first year)

Your new employee needs stuff to actually do their job.

Computer: $800 to $1,500 (and you'll replace this every 3 to 4 years) Software licenses: $500 to $1,200 annually (Microsoft 365, industry-specific tools, CRM access, etc.) Phone: $300 to $800 (plus $50 to $80 monthly for service, so add another $600 to $960 annually) Desk, chair, supplies: $400 to $800 Monitor, keyboard, mouse, headset: $300 to $500

First-year total: $3,000 to $5,460 Ongoing annual costs: $1,600 to $2,660

Let's use $3,500 for year one and $2,000 for subsequent years.

Onboarding and Training: $3,200 to $8,000

This is the cost nobody budgets for because it's not a line item. But it's very real.

The time you spend interviewing candidates? That's money. Conservatively, you're spending 20 to 30 hours total (writing the job description, reviewing resumes, conducting interviews, checking references, handling paperwork). At what your time is worth, that's easily $2,000 to $4,000.

Then there's actual training. Most employees take 2 to 3 months to become fully productive. During that time, you or another team member is spending hours daily showing them the ropes.

Let's say you spend 2 hours per day for the first month, then 1 hour daily for the next two months. That's 100 hours of your time at, let's be conservative, $50 per hour. That's $5,000.

But it gets worse. During those first three months, your new hire is working at maybe 25%, then 50%, then 75% productivity. You're paying full salary for partial output.

The lost productivity cost in those first three months? Roughly $8,000 to $10,000 in reduced output.

For this calculation, let's just count your direct time investment: $5,000.

Background Checks and Administrative Costs: $500 to $800

Background checks: $50 to $150 Reference checking services: $100 to $300 Job posting fees (Indeed, LinkedIn, etc.): $200 to $500 Payroll processing fees: $150 to $300 annually

Let's call it $650.

Running Total for Year One

Base salary: $40,000 Payroll taxes: $3,060 Health insurance: $7,800 Paid time off: $3,077 Workers' comp: $800 Equipment (year one): $3,500 Training and onboarding: $5,000 Administrative costs: $650

Total Year One Cost: $63,887

And that's assuming everything goes smoothly. Which it won't.

The Hidden Costs Nobody Mentions

But wait. We're not done.

Management Overhead

Somebody has to manage this person. Even the best employee needs direction, feedback, performance reviews, and problem-solving support.

Let's say you spend 3 hours per week on management tasks (check-ins, answering questions, reviewing work, course-correcting). That's 156 hours annually.

At a conservative $50 per hour valuation of your time, that's $7,800 per year.

Every year.

The Turnover Lottery

Here's the stat that should terrify you: the average employee tenure for administrative and support roles is 2.3 years. In some industries, it's less than 18 months.

What happens when they leave?

You lose 2 to 3 months of productivity while you find a replacement. There's knowledge drain (everything they knew about your systems walks out the door). You're back to square one on training and onboarding.

The cost of replacing an employee? Industry studies put it at 50% to 200% of their annual salary, depending on role complexity.

For a $40,000 admin position, expect to spend $20,000 to $40,000 in replacement costs. And that's being optimistic.

Let's amortize that over a 2.3-year average tenure. That's an additional $8,700 to $17,400 per year in hidden turnover costs.

Payroll Errors and Compliance Issues

Mess up payroll? That's penalties. Misclassify someone as exempt when they should be non-exempt? That's back wages and fines. Forget to file a required form? More penalties.

Small business payroll mistakes cost an average of $845 annually in penalties and corrections, according to IRS data.

The Actual Annual Cost

Let's put it all together for year one:

Direct costs: $63,887 Management overhead: $7,800 Turnover (amortized): $8,700 (conservative estimate) Compliance and payroll issues: $845

True Year One Total: $81,232

For ongoing years (assuming no turnover), you're looking at around $64,000 to $68,000 annually.

But remember, turnover is not an "if" but a "when." So factor in at least one major hiring cycle every 2 to 3 years.

Industry-Specific Variations

These numbers shift depending on your industry.

Home Services (HVAC, Plumbing, Electrical, Landscaping)

Higher workers' comp insurance (multiply by 2 to 3 times) Vehicle costs if they're mobile Tool and equipment expenses Often higher turnover rates

Expect to add $5,000 to $10,000 to the totals above.

Property Management and Real Estate

Lower physical equipment costs Higher software and licensing fees Often need errors and omissions insurance

Costs are similar to baseline, maybe slightly lower by $2,000 to $3,000.

Professional Services

Higher salary expectations in competitive markets More sophisticated software needs Potentially higher training costs due to specialized knowledge

Add $8,000 to $15,000 to baseline estimates.

Employee vs. Contractor: The Other Option

"Okay," you're thinking, "I'll just hire a contractor instead. 1099. Done."

Not so fast.

The IRS has very specific rules about who qualifies as an independent contractor vs. an employee. Misclassify someone, and you're looking at back taxes, penalties, and potential lawsuits.

Generally speaking, if you control when, where, and how someone does their work, they're probably an employee in the eyes of the IRS. Doesn't matter what you call them.

Independent contractors are great for project-based work or specialized tasks. For ongoing administrative support? You're almost certainly looking at a W-2 employee relationship.

And if you think you can just ignore the rules? The penalties for misclassification start at $50 per W-2 you should have filed and go up from there. Plus back taxes. Plus interest. Plus potential overtime violations if they worked more than 40 hours.

It gets expensive fast.

The Alternative Most Business Owners Miss

Here's what's wild about all these numbers: you can get 20 hours per week of dedicated administrative support, complete with customer service, email management, scheduling, and lead follow-up, for around $1,500 monthly through a virtual assistant solution.

Let me break that down.

Annual cost for 20 hours/week VA support: $18,000

Compare that to the $81,232 first-year cost (or $64,000+ ongoing cost) of a full-time employee.

That's a savings of $63,232 in year one, or $46,000+ in subsequent years.

"But what about benefits?" you might ask. "What about loyalty and culture?"

Fair questions. Here's what you actually get with a professional VA solution like Better Business Ventures:

No payroll taxes. No benefits. No equipment. No office space. No management overhead. No turnover costs (the agency handles replacements seamlessly). No training time (they're already trained). No 2-3 month ramp-up period (most clients see results in two weeks).

And here's the kicker: you get better coverage. Your VA isn't taking two weeks of vacation and leaving you scrambling. They're not calling in sick. They're not quitting after 18 months. If they're unavailable, the agency provides backup coverage.

For many small businesses, especially in that $300K to $2M revenue range, a full-time employee is overkill anyway. You don't need 40 hours of administrative support. You need 15 to 25 hours of really good administrative support.

When Does a Full-Time Employee Actually Make Sense?

Look, I'm not saying you should never hire. There are absolutely times when bringing someone on full-time is the right move.

When you need 35+ hours per week of consistent work in a specialized role. When you're building a local team culture and need people in the same physical space. When the role requires deep institutional knowledge that takes 12+ months to develop. When you've hit the revenue level where the $70K to $80K true cost is a rounding error.

But if you're a small business owner trying to get out from under operational chaos? If you're spending 20 hours per week on admin work that could be delegated? If you're in that growth phase where you need support but aren't ready to commit $80K plus management overhead?

There are smarter options.

The Math That Changed Everything

I mentioned earlier that I hired my first admin three years ago. What I didn't mention is that she was my last full-time administrative hire.

After running the real numbers (and living through the turnover cycle twice), I switched to a hybrid VA solution. We now handle administrative work, customer service, and lead follow-up through Better Business Ventures.

Our annual cost for equivalent coverage? About $32,000 for what used to require 1.5 full-time employees.

Savings compared to full-time staff? Roughly $87,000 annually.

But the real win isn't just the money. It's the flexibility. We scaled up during busy season without posting job ads or conducting interviews. We scaled back during a slow period without layoffs or severance. We tested new processes without lengthy training periods.

And when one of our VA team members moved on to another opportunity? I didn't even know about it. The agency handled the transition. No disruption to our operations.

What This Means for Your Business

If you're sitting there thinking, "I need help, but I can't afford $80K for an admin," I have good news: you're not crazy. That feeling of sticker shock? It's legitimate.

The small business hiring model is broken. The real cost of hiring full-time staff has gotten so high that it prices out exactly the businesses that need help the most.

You're stuck in this weird middle ground. Too big to do everything yourself. Too small to absorb the true cost of full-time employees.

But here's what most business owners don't realize: that middle ground is where most businesses live. And it's where hybrid VA solutions make the most sense.

At Better Business Ventures, our average client saves $47,000 annually compared to hiring equivalent full-time staff. They get better coverage, more flexibility, and faster implementation (two weeks vs. two to three months).

Are there trade-offs? Sure. A VA isn't going to be in your office. They won't attend your company holiday party. They won't develop the same institutional knowledge as a 5-year employee.

But they will answer your phones while you're on a job site. They will follow up with leads within five minutes instead of five hours. They will manage your inbox so you're not doing email at midnight. They will handle scheduling so you can focus on actually running your business.

And they'll do it for about a third of what a full-time employee actually costs.

Running Your Own Numbers

Every business is different. Your state might have higher unemployment taxes. Your industry might require specific insurance. Your market might demand higher salaries.

But the framework stays the same:

Take the base salary you're considering. Add 40% to 50% for taxes, benefits, and basic overhead. Add another $10,000 to $15,000 for onboarding, training, and first-year equipment. Factor in management time at what your hours are actually worth. Include a realistic turnover cost amortized over expected tenure.

When you run your real numbers, you'll probably land somewhere between 1.6x and 2.1x the base salary for true annual cost.

For most small business owners, that number is eye-opening. And a little bit sickening.

The Question You Should Be Asking

The question isn't "Can I afford to hire?"

The question is "What's the most cost-effective way to get the support I need?"

Sometimes that's a full-time employee. Often, especially for small and scaling businesses, it's not.

We've worked with hundreds of business owners who were convinced they needed to hire full-time staff. After running the real numbers and comparing options, most chose a hybrid solution. Not because they're cheap (they're not), but because they're smart.

$47,000 in average annual savings. That's not marketing fluff. That's the actual difference between what our clients used to spend on full-time administrative staff and what they spend now.

What would you do with an extra $47,000 per year? Because that's not a hypothetical question. It's a choice you get to make.

Ready to see what your actual hiring costs look like? Book a free operations audit and we'll walk through your specific situation. We'll show you what full-time hiring would really cost for your business, what you're actually paying for the administrative work you're doing yourself, and whether a hybrid VA solution makes sense for your situation. No pressure, no sales pitch. Just real numbers for your business.

Because knowing what things actually cost? That's how you make smart decisions.