The true cost of an employee is typically 1.25 to 1.4 times gross salary. The multiplier comes from Joe Hadzima's MIT Sloan work on the real cost of employees, and it means a €5,000 gross salary is €6,250 to €7,000 leaving the account every month once employer taxes, tools and equipment stack on top of the number in the offer letter.
That gap matters because hiring is the biggest financial decision most early startups make, and the only one routinely made without looking at the bank account. A hire feels like progress. It is also, mechanically, the single fastest way to shorten your runway. This is not an argument against hiring. It is an argument for knowing the real number before you say yes.
The real monthly cost
Start with the gross salary and add what the offer letter leaves out:
Employer taxes and contributions. In most of Europe, the employer pays 20% to 40% on top of gross salary in social contributions. A €5,000 gross salary is €6,000 to €7,000 out of the account every month. Learn your country's multiplier and apply it to every hiring conversation.
Tools and equipment. Laptop, licenses, a seat on everything you pay per user. Usually €150 to €400 a month, forever.
Ramp time. For an engineer, expect two to three months before full output. For a salesperson, expect their quota to be missed for a quarter. You pay full price during ramp; budget for it instead of resenting it.
A useful rule of thumb: real monthly cost = gross salary × 1.3 + €250. Precise enough for a decision, honest enough to trust; the free employee cost calculator itemizes it with your country's employer taxes instead of the average.
The runway math
Say you have €200,000 in the bank and a net burn of €10,000. That is 20 months of runway.
Now add a senior engineer at €5,800 gross, which is roughly €7,500 real monthly cost:
| Before | After | |
|---|---|---|
| Net burn | €10,000 | €17,500 |
| Runway | 20 months | 11.4 months |
One signature moved your out-of-money date forward by eight and a half months. Again: possibly the right call. But it should be made while looking at that table, not discovered in it three months later.
Three questions before any hire
1. What specifically stops happening if we do not hire? "We are all busy" is not an answer. "Nobody is answering support and churn is rising" is. If you cannot name the broken thing, the hire is a comfort purchase.
2. Does this hire move money in, or only money out? Some roles pay for themselves on a visible path: a salesperson with a realistic quota, an engineer unblocking a paid feature. Others are pure cost until scale. Both can be right; know which one you are buying.
3. What is the contractor version? A three-month contractor costs more per hour and vastly less per mistake. If you are less than 80% sure about the role, rent it before you own it. The worst case of a contractor is an invoice. The worst case of a bad hire is six months of runway plus the morale bill.
Committing with your eyes open
The practice that makes this easy: model the hire as a plan before it becomes a person. Write down the real monthly cost, apply it to your burn, and look at the new runway date. If the date still lets you sleep, make the offer. In Plainhub this is literally a Commit button: the draft shows you the runway hit, and committing folds it into your live burn so the model never flatters you.
Hire on purpose, with the date in view. Your future self, reading the bank balance, will know whether you did.