The salary is only half the cost of a new hire.

Before adding a head, write down the specific problem in one sentence: “I can’t take any more clients because I’m doing the bookkeeping myself,” or “Service calls slip because nobody owns scheduling.” Then ask whether a person is the best lever.

Sometimes the answer is software (a scheduling tool, an automated bookkeeping pipeline), a process change, a contractor, or raising prices. A full-time hire is the most expensive and least reversible option — it should win the comparison on merit, not default.

The total annual cost above is your monthly cash commitment for as long as the role exists. CPP, EI, vacation, and benefits don’t pause when work is slow. Severance and final vacation payout don’t pause either.

Rule of thumb: have six months of the full loaded cost in reserve before you sign the offer letter. If you don’t, the hire is borrowing from your future self — and if the bet doesn’t pay off in time, the business gets squeezed by something that was supposed to grow it.

Most bad hires aren’t bad people — they’re people in roles where nobody can tell if they’re winning. Before the offer goes out, write down the two or three things this person needs to produce in their first 90 days. Not activities (“learn the systems”) but outputs (“close 12 of last quarter’s open files,” “build a working scheduling cadence with zero missed callbacks for two weeks”).

If you can’t articulate the outputs, the role probably isn’t ready to hire for yet. Spend another week clarifying it — that week is the cheapest investment you’ll make on this hire.

The revenue calculator above answers this directly for billable / production roles. For overhead roles (admin, ops, finance), the question is different: what revenue does this hire let me unlock by freeing my own time, or by preventing churn, or by reducing errors?

Quantify it. “Hiring an admin frees 8 hours/week of my time, which I’ll spend on $300/hr billable work” = $124,800 of unlocked annual capacity. If the loaded cost of the admin is $65K, the math works. If you’re honest and the freed time would mostly go to lower-value work, the math probably doesn’t.

LER is gross profit ÷ total direct labour cost. Pull last year’s numbers, run the calculation, and you’ll have a starting line.

Healthy service businesses run 2.0–3.0×. Below 1.5× usually means the business is over-staffed for its revenue or under-priced for its cost base. Above 4× might mean you’re under-staffed and leaving capacity on the table.

Project the LER after the hire under realistic ramp-up assumptions (most people don’t hit full productivity for 90–180 days). If the post-hire LER stays above your floor, you’re probably fine. If it dips into the red, you’re probably hiring too early.

One of the most common mistakes: hiring a $75K bookkeeper to handle a roster of $200/month bookkeeping clients. The math literally cannot work, regardless of how good the hire is.

Before you hire, look at your billable rates or your unit pricing. If they were set when you were a solo operator working from your kitchen table, they probably don’t price in the loaded cost of a team. Raising prices feels harder than hiring, but raising prices first is what makes the hire affordable. Hiring first and hoping prices catch up is what makes the hire a slow-motion bleed.

You’re not hiring for the job today; you’re hiring for the job 12–18 months from now, because that’s how long it takes them to fully ramp and start delivering at peak. Picture what the role looks like once they’re humming — broader scope? Managing a small team? More autonomy?

Now ask: does the person sitting across from you in the interview actually want that job? Or are they accepting an offer for the job today because they need the cheque, and you’ll be back at the recruiter’s in 14 months when their growth need and your role need diverge?

The calculator above gives you the run-rate cost. The first-year cost is higher because of:

• Recruiting — agency fees (15–25% of base if used), job-board spend, your own time interviewing.
• Onboarding — your hours and your team’s hours training, plus their full salary while they’re below productive output.
• Ramp lost productivity — most knowledge-work roles are at 50% productivity in month 1, 75% by month 3, and full by month 6. That gap is real cost.
• Equipment setup — software seats, hardware, training subscriptions, sometimes signing bonuses or relocation.

A reasonable estimate is to add 15–25% on top of the year-one loaded cost for these first-year extras. For senior or technical roles, it can be more.

If you’re uncertain about the workload, the scope, or whether the role even works the way you imagine it, a contractor or fractional engagement is the cheaper experiment. You’ll pay a higher hourly rate, but you skip CPP, EI, vacation, WCB, EHT, and benefits — and either side can walk without termination costs.

The right use case: you think you need a part-time controller, but you’re not sure if it’s 8 hours/month or 8 hours/week. Hire a fractional CFO for 6 months. By the end, you’ll know exactly what role to scope and you’ll have validated cash-flow evidence for the hire.

BC employment standards require notice or pay in lieu (or both) when terminating without cause — the minimum scales with tenure, and common law severance can be much longer. A bad hire that drags on for two years is exponentially more expensive than one you part ways with at 90 days.

Build a 30/60/90 check-in cadence with explicit decision points. If by day 90 the outputs you wrote down at the start aren’t in sight, have an honest conversation. Most owners delay this conversation by 3–6 months out of conflict avoidance — and that delay is what makes the bad hire genuinely expensive. The hire itself wasn’t the mistake; not acting on the early signal was.