Employee cost consists of every conceivable incurred cost in maintaining an employee.
Components of cost: Employment costs falls into several broad categories

Recruiting Expenses: Finding technically qualified people who can function effectively in a rapidly growing start-up venture is not easy task. Devoted the time to make sure that your hires are as close to perfect as possible. Anything less will be a drag on your business.

Basic Salary: Basic Salary varies all over the place depending on the industry and a variety of other factors. There are data, which can help you calibrate an appropriate base salary. Be sure to establish rational Salary ranges given your growth plans. This means that in most- cases there should not be great salary differentials between early hires and later employees- any “risk component” of being an early hire should be made up in the equity compensation component.
Employment Taxes: In preparing your personnel budget be sure to include allowances for social security.

Benefits: Basic salary and employment taxes are a minimum- in most cases you will need to provide some benefits. Typical benefits include life insurance and health coverage. Other benefits could include long-term disability insurance, dental plans, dependent care assistance tuition reimbursement, retirement plans etc. These involve actual payment of benefits by the employer. There are also “self-funded” plans where the employer-contribution is the administrative costs-e.g. Vacation is another cost but is subsumed in the basic salary.

Unless you are traveling salespeople, you need to provide some physical space to house the new employee. Obviously the rent per square foot varies depending on the fanciness and location of the facility. But how many square feet does an employee need? Again this varies but there are some guidelines. Work cubes are typically 8`x 8` in size and private offices range in size, in high tech figure on 225 to 250 square feet per employee when you add in common space.
Other Equipment: The basics these days for high tech or office workers have to include a computer and telephone. Even with decrease in PC prices, figure for a computer software and for telephone handset on average when you factor in installation. Don’t forget the periodic expensive upgrade you will need to your LAN and voice mail systems.

Other Approaches: Instead of figuring out each cost component separately you can develop some simple metrics. For example: a different metric for planning the manufacturing side of the business. It takes some time to really understand the cost components of business segments in order to develop the metric and the underlying assumptions need to be recalibrated periodically.