Total cost of employment

What it means

Total cost of employment is what one employee actually costs the employer: gross pay plus the contributions the employer pays. That is the figure budgets are built on, not the number on the payslip.

The gap between what the company pays and what the employee receives is made up of both sides’ contributions and the tax advance. Salary is negotiated in gross, but planned in total cost of employment.

Super-gross pay is not a legal term, and in Slovakia neither tax nor contributions are calculated from it. Both start from gross pay: employee and employer contributions are computed on it, and tax on the amount left after the employee’s contributions. Total cost of employment is a management figure for budgets and costing, not an item payroll reports anywhere.

How it works in practice

The cost plan also includes items that never appear in contributions: meal contributions, holiday, sick pay, training, equipment and tools. Only that total is comparable with an external provider’s price.

So choosing between an employee and a service is not a comparison of salary against an invoice but of total cost of employment including cover - which is the core of the insourcing decision.

When a client is weighing a pay rise or preparing an offer for a new hire, we give them three figures at once: gross pay, net pay and total cost of employment. The owner sees that a rise the employee will feel as small costs the company noticeably more, and can decide whether a different form of reward would work better.

What to watch out for

Contribution rates, assessment bases and caps change every year along with the minimum wage. A budget built on last year’s figures therefore understates the cost from January onwards.

At high salaries part of the contributions stops at the maximum assessment base, so total cost of employment does not rise by the same percentage as gross pay. A budget that simply multiplies gross pay by one coefficient overstates the cost of management roles and, with annual bonuses, distorts the cost in the month of payment too.