Hiring Budget Calculator
See how much new revenue a hire has to bring in to pay for itself — the go/no-go number before you post the job.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator answers the go/no-go question before you post a job: how much new (or freed-up) revenue does this hire need to generate for the business to carry them? It works from the fully loaded cost — not the salary — and converts it to required revenue two ways: a target labor-cost ratio, or your gross margin. If you expect the hire to produce revenue directly, it also computes the payback timeline.
The formulas
- Revenue needed (labor-cost-ratio method)
- fully loaded annual cost ÷ target labor % of revenueIndustry rules of thumb for the target: restaurants ~30%, retail ~20%, services ~45%.
- Revenue needed (gross-margin method)
- fully loaded annual cost ÷ gross margin %Each revenue dollar contributes only its margin toward the salary — the rest goes to cost of goods.
- Monthly equivalent
- revenue needed ÷ 12
- Payback months (optional)
- fully loaded cost ÷ (expected annual revenue from the hire ÷ 12)Shown only when an expected revenue lift is entered; the tool also flags an expected-revenue-to-cost multiple below 2×.
Worked example
- Say the hire’s fully loaded cost is $75,000 a year (from the True Cost of Employee calculator) and you target labor at 30% of revenue.
- Revenue needed = $75,000 ÷ 0.30 = $250,000 of additional annual revenue.
- That is $20,833 a month of new or freed-up revenue for the hire to fit the labor budget.
- Switching to the gross-margin method at a 55% margin instead: $75,000 ÷ 0.55 = $136,364 — less revenue is needed because each dollar contributes 55 cents toward the cost rather than being held to a 30% labor line.
- If this hire were expected to produce $200,000 a year themselves, payback would run $75,000 ÷ ($200,000 ÷ 12) = 4.5 months, at 2.67× their loaded cost.
Rates, benchmarks & sources
- Labor-cost-ratio presets (restaurants ~30%, retail ~20%, services ~45%), the 2–3× attributable-revenue bar for a revenue-generating hire within 12 months, and the 3–6 month cash buffer before hiring — Industry rules of thumb
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- The labor-cost ratios and the 2–3× revenue bar are rules of thumb, not lender or accounting standards — your industry, stage, and strategy can justify very different targets.
- Assumes the loaded cost you enter is complete; using bare salary instead of the True Cost of Employee figure understates the requirement by roughly 25–40% (the loaded-cost rule of thumb).
- The gross-margin method treats margin as constant — if the new hire changes your cost structure (more capacity, better rates), the real requirement shifts.
- Cash timing is flagged but not modeled: payroll starts on day one while revenue ramps, so a hire can pencil out annually and still strain cash for months.
- Non-revenue benefits of a hire — owner time freed, error reduction, capacity for future growth — are real but not quantified here.
Frequently asked questions
Why do the two methods give such different revenue numbers?
They answer slightly different questions. The labor-cost-ratio method asks how much total revenue keeps labor at a target share of sales — at 30%, a $75,000 hire needs $250,000. The gross-margin method asks how much revenue generates enough margin dollars to cover the cost — at 55% margin, $136,364. Use the ratio method if you manage labor as a percentage of sales (common in restaurants and retail); use the margin method if you think in contribution terms.
Should I use salary or loaded cost in this calculator?
Loaded cost, always. A $55,000 salary typically costs $70,000–$77,000 once employer payroll taxes, benefits, equipment, and overhead are added — the 1.25–1.4× rule of thumb — and the True Cost of Employee calculator computes your actual figure. Budgeting a hire off bare salary is the classic way owners approve a hire the business cannot actually carry.
What is a reasonable revenue expectation for a revenue-generating hire?
A common bar — a rule of thumb, not a standard — is 2–3× their loaded cost in attributable revenue within 12 months. At a $75,000 loaded cost that means $150,000–$225,000; the tool flags expected revenue below 2× as thin. The logic is that their revenue must cover not just their own cost but the margin the business needs from every activity, plus the ramp-up months where they produce little.
The math works — can I afford the hire today?
The annual math is necessary but not sufficient, because payroll starts on day one and revenue lags. A common rule of thumb is to hold 3–6 months of the hire’s loaded cost in reserve before committing — roughly $19,000–$38,000 for a $75,000 hire — so a slow ramp does not become a cash crisis. Run your Emergency Fund numbers alongside this one before posting the job.
Does "freed-up revenue" count, or only new sales?
Both count. If a hire takes work off your plate and you redirect those hours to billable or sales activity, the revenue you recover is just as real as revenue the hire generates directly — that is why the tool phrases the requirement as new or freed-up revenue. Be honest in the estimate, though: hours freed only count if they genuinely convert to revenue rather than to a shorter week.