Employer Costs - from Operating Expense Budget

Employer Costs arise when businesses hire employees. These costs represents such expenses as vacation pay, unemployment insurance and pension contributions, etc. Murray has forecasted his employer costs to be 11% of the salaries paid to his employees. Therefore, in 200X, Murray expects to incur employer costs of $286 per month ($2,600 paid in salaries per month x 11%). As a result, his 200X Forecasted Income Statement will show Employer Costs of $1,716 ($286 per month x 6 months). In addition, Murray's 200X Forecasted Cash Flow Statement will show a Cash Outflow of $286 per month for Employer Costs (from July to December, 200X).

In 200Y, Murray expects to incur employer costs of $334 per month ($3,033 paid in salaries per month x 11%). Therefore, Murray's 200Y Forecasted Cash Flow Statement will show a Cash Outflow of $286 per month for Employer Costs. In addition, his 200Y Forecasted Income Statement will show Employer Costs of $4,004 ($334 per month x 12 months; IE January 200Y to December 200Y).