The Hiring Plan Is Your Real Burn:
Modeling Headcount at Fully Loaded Cost

Short answer

Model each hire as a separate row with a start month, base salary and a fully loaded multiplier of 1.25x–1.4x to cover payroll taxes, benefits and equipment. Phase salaries in from realistic start dates, add one-off recruiting costs, and roll the total into your burn — headcount is usually a startup's largest expense.

Five engineers at $100,000 base is not a $500,000 line item. Glencoyne's October 2025 cost analysis puts the real figure above $611,000 once taxes, benefits and equipment land — a gap of more than $9,000 a month that quietly shortens your runway. For most software startups, payroll dominates spend, which makes headcount planning the startup financial model's highest-stakes tab. This piece gives you the fully loaded math, a copy-paste hiring plan template, and the timing tricks that keep the burn forecast honest.

How do you model headcount and hiring costs in a financial model?

One row per hire, one multiplier per role type, one start month per row. That's the structure. The numbers come from three buckets, and it pays to know what's in each — because the multiplier isn't magic, it's arithmetic.

Bucket 1: Mandatory payroll taxes (no choice)

For US employers, the legally required load per the IRS and state schedules:

• FICA: 7.65% of wages — 6.2% Social Security (up to the annual wage cap) plus 1.45% Medicare, uncapped (IRS Topic 751)
• FUTA: 6% on the first $7,000 of wages, typically reduced by credits to 0.6% — about $42 per employee
• SUTA: state unemployment tax; new-employer rates run from under 1% to over 3% depending on the state, on wage bases from $7,000 to $40,000+
• Workers' compensation: small for desk roles, meaningful for warehouse or field roles

Bucket 2: Benefits (strategic choice)

The biggest swing factor. KFF's employer survey puts average annual premiums for employer-sponsored health coverage at roughly $8,400 for single coverage and about $24,000 for family coverage — and your cost depends on what share you cover. Add a competitive 401(k) match at 3–4% of salary, plus dental, vision, life and disability at another 1–2%, and benefits alone can add 10–15 points to the multiplier.

Bucket 3: Overhead (easy to forget)

A $2,400 laptop amortized over three years, $100–$300 per month in software licenses, a remote-work stipend, and — for agency-sourced hires — recruiting fees of 20–25% of first-year salary, best amortized over expected tenure.

Stack the buckets on a $100,000 engineer and Glencoyne's worked example lands at $122,212 — a 1.22x multiplier with lean benefits, drifting toward 1.35x+ with family health coverage or a high-tax state. Hence the planning rule: 1.25x–1.4x base salary for every US hire in your model.

The hiring plan template

Copy this structure into your model — one row per hire, actual or planned:

*Commission scales with bookings — model it as a % of new revenue, not a fixed salary line.

Five practical rules make this template work:

1. One multiplier per role family, derived from your payroll actuals. Don't guess 1.3x forever; after two quarters, divide true total people cost by total base salaries and use your number.
2. Start months are forecasts too. Six to twelve weeks from job post to start date is normal; senior roles take longer. A hire modeled in January that starts in April overstates Q1 burn and understates Q2 capacity.
3. Variable comp follows revenue. Sales commissions belong in the revenue block as a percentage of bookings, so a great quarter automatically costs more.
4. One-off costs hit the start month. Recruiting fees, equipment, signing bonuses — lumpy, cash-relevant, forgettable.
5. Raises and promotions exist. Add a 3–5% annual merit line on the whole payroll base rather than pretending salaries freeze for three years.

The sum of the "monthly loaded" column, month by month, is your payroll burn curve. Feed it straight into your gross and net burn calculation and your runway math.

Why base-salary budgeting keeps killing runway forecasts

Because every error points the same direction. Skip employer FICA and you're 7.65% low (IRS Topic 751). Skip health insurance and you're thousands low per head (KFF). Skip laptops, licenses and recruiting fees and each hire arrives with an invisible first-month spike. None of these mistakes ever makes your model too pessimistic — they all understate burn, which means the cash-out date in your model is always later than the one in your bank account.

The contractor comparison sharpens the point. Glencoyne's example employee at $122,212 per year works out to roughly $61/hour over 2,000 hours. A freelance developer quoting $110/hour looks wildly more expensive — until you remember the employee number before loading looked like $50/hour. Only fully loaded figures make the employee-versus-contractor call an honest one, and the same logic applies when you're hiring your first employee.

The 90-day payback question

Here's the decision rule we use before any hire goes into the plan: name what the role must produce, at fully loaded cost, within 90 days of starting — and what you'll do if it doesn't. A $15,000/month loaded engineer must ship something that moves retention or throughput. A $12,500/month AE must be carrying pipeline by month three. If nobody can articulate the answer, the row doesn't go in the model. This one habit converts the hiring plan from a wish list into a capital-allocation document — which is exactly how investors read it inside the financial model VCs actually read.

What this means for you

Rebuild your headcount tab this week: one row per hire, 1.25x–1.4x multiplier, realistic start months, one-off costs in the start month, commissions tied to bookings. Then recompute runway. Most founders find their cash-out date moves forward by one to three months — better to learn that from your own spreadsheet than from a bounced payroll run.