In a business plan, fringe benefits as a percentage of payroll costs should be shown as what percentage?

• A. 20 percent
• B. 60 percent
• C. 40 percent
• D. 80 percent

Answer: (C)

Fringe benefits are the extra costs of employing staff beyond wages, like health insurance, retirement contributions, payroll taxes, and paid time off. In a business plan you express these costs as a percentage of payroll to show total labor cost. A common planning assumption is about forty percent: for every dollar of wages, about forty cents are added for benefits, so total labor cost is roughly 1.4 dollars per dollar of payroll. For example, payroll of $100,000 would imply about $40,000 in fringe benefits, making total labor cost around $140,000. This reflects typical benefit levels without over- or underestimating costs, though actual fringe benefits can vary by industry and benefits package. The other options would understate or overstate typical benefits and are less credible in budgeting.