Can your business afford another employee? Build a hiring cash budget

Budget the whole employment cost

For a China-based employer hiring an employee, consider the proposed gross salary, agreed bonus, employer social-insurance and housing-fund contributions, and applicable benefits. List recruitment, equipment, onboarding and training separately where they arise. Variable compensation and savings from replacing an external supplier should be modelled as scenarios until agreed and evidenced.

China's Labor Contract Law, Article 17, includes remuneration and social insurance among matters for an employment contract. Contribution bases, rates and relevant relief must be checked for the actual location, period and employee; a single nationwide rate is not assumed here. This is a budgeting example for a China employment relationship, not a statement about rules in every country.

Example: RMB 1.32 million in the first 12 months

Suppose a business proposes to recruit a senior manager at a gross salary of RMB 80,000 per month. It budgets another RMB 10,000 per month for employer contributions and related costs, subject to verification against the actual locality and employee. Assume both amounts are paid monthly for 12 months, with no additional bonus or recurring cost in this scenario.

One-time recruitment, equipment and onboarding support are budgeted at RMB 240,000, paid in month one:

• Continuing monthly payment: RMB 80,000 + RMB 10,000 = RMB 90,000.
• Twelve months of continuing payments: RMB 90,000 × 12 = RMB 1.08 million.
• Including one-time items, first-year cash budget: RMB 1.32 million.

Recalculate if the bonus, contribution amount or payment schedule differs. Do not add employee deductions withheld from the stated gross salary as a second employer cost. Cash payment timing and expense recognition under the applicable accounting regime are separate questions.

Can the business pay at the right time?

Suppose the company starts with RMB 4 million of available cash. Expected receipts for the next three months are RMB 5m, RMB 6m and RMB 7m; payments for the existing business are RMB 6.8m, RMB 6.2m and RMB 5.6m. These payments exclude the new role. For this monthly comparison, assume all receipts arrive before that month's payments and no other cash movements occur.

Amounts in the table are RMB millions. “Existing net” is the month's expected receipts less existing payments; closing cash adds that net amount to the opening balance and subtracts the new-role payments.

Month one includes the RMB 240,000 one-time budget plus RMB 90,000 of continuing payments. If management wants at least RMB 1 million at each month-end, the base case remains above that floor.

Now delay RMB 1.5 million of month-two customer receipts into month three, with everything else unchanged. Month-two receipts fall to RMB 4.5 million and its closing cash falls to RMB 80,000, or RMB 920,000 below the stated floor. Month three's closing balance returns to RMB 2.89 million after the delayed receipt. The three-month total does not change, but the timing creates a material funding problem in month two.

A monthly closing balance does not establish that cash is sufficient on every day within the month. Add actual payroll, contribution, supplier, customer and debt-payment dates to a weekly or daily rolling forecast. Exclude restricted funds from available cash and do not treat an unpaid receivable as money already in the bank.

What additional contribution would cover the role?

Assume the role's objective is to generate incremental business; after the other direct costs of that incremental work, the company expects a 30% contribution margin, with no additional shared costs in this scenario. To cover the RMB 1.32 million first-year budget, the target is:

Additional net revenue = RMB 1.32m ÷ 30% = RMB 4.4m.

The 30% is a scenario assumption, not an industry standard. Verify the incremental revenue, related costs and timing; do not subtract the role's employment cost a second time if it is already included in the RMB 1.32 million target. The target does not guarantee sales or a return.

Make the decision with the dates and assumptions visible

Place the role's responsibilities, expected start date, continuing and one-time costs, contribution objective, minimum cash balance and delayed-receipt scenario together. If the shortfall is unacceptable, compare a later start, a staged hire or different payment timing while meeting the actual contract and legal obligations.

CaiGeek is an AI financial assistant for small and medium-sized businesses. Ask it to compare hiring dates using the business's budget and payment timetable; management and finance staff supply and review the facts. The cash planning guide and contact page provide further context and service information.