Employee Cost Calculator

What an employee costs beyond the wage

The number on the job offer is not the number on the budget. When someone works for you, federal law adds a set of employer taxes on top of every wage dollar, your state adds unemployment insurance, and the benefits you promised add the rest. Payroll teams call the result the loaded cost, and it is the figure that decides whether a position pays for itself.

The gap is not small. In the BLS's December 2025 survey of employer costs, private industry employers paid $46.15 per hour worked for the average worker, of which $32.36 was wages. The other $13.79, about 29.9 percent of the bill, was payroll taxes, insurance, paid leave and retirement. This calculator adds the same layers to any hourly wage: the tax lines, workers compensation, health insurance and a retirement match, then shows the annual total, the cost per hour and a multiplier you can carry into a budget.

The formula and the 2026 tax lines

The calculator runs one line per cost, then adds them up: total cost = base pay + FICA + FUTA + SUTA + workers comp + benefits. Base pay is the hourly wage times hours per week times paid weeks. The tax lines follow the IRS's 2026 Publication 15, which sets employer Social Security tax at 6.2 percent and employer Medicare tax at 1.45 percent, a combined 7.65 percent. Social Security stops applying once wages pass $184,500 for the year; Medicare has no cap.

The unemployment lines work on a wage base, not the whole salary. Federal FUTA taxes the first $7,000 of each employee's wages at 6.0 percent, but most employers claim a 5.4 percent credit for paying state unemployment tax on time, which nets the rate to 0.6 percent, as IRS Topic 759 on Form 940 explains. That is why the $52,000 example owes only $42 of FUTA: 0.6 percent of $7,000.

Worked example: a $25 an hour employee

An office hire at $25.00 an hour, 40 hours a week and 52 paid weeks a year earns $52,000 of base pay over 2,080 hours. The employer also promised health insurance at $450 a month and a 3 percent 401(k) match. Here is the whole bill the calculator assembles.

Divide the total by the 2,080 hours and the position costs $30.63 per hour worked, against the $25.00 on the offer letter. The multiplier is 63,710 / 52,000 = 1.225, meaning every wage dollar carries about 22.5 cents of taxes and benefits. If the budget holds $65,000 for the year, this hire fits with about $1,290 to spare.

Which lines are fixed by law and which are yours to set

Two lines barely move. Employer FICA is set at 7.65 percent for 2026 (6.2 percent Social Security up to $184,500 of wages, 1.45 percent Medicare with no cap), and it applies to bonuses, overtime and commissions the same as regular pay. FUTA stays at 6.0 percent gross on the first $7,000, with the 5.4 percent credit pulling most employers down to 0.6 percent. Employers in a handful of credit reduction states pay more than 0.6 percent because their state borrowed federal unemployment funds and has not repaid them, so check the IRS list before budgeting the minimum.

Everything else is local. SUTA rates are assigned per employer by each state, new employers usually start at a standard rate, and the taxable wage base differs by state. Workers compensation runs on class codes and an experience rating, so a roofer and a bookkeeper in the same town can face rates several points apart. The calculator leaves those two lines open on purpose: type the rate your payroll provider quoted. The prefilled 3.0 percent SUTA and 1.0 percent workers comp are worked examples, not quotes.

Benefits are the biggest swing line

Payroll taxes are arithmetic; benefits are a decision, and usually the larger half of the markup. In the BLS's December 2025 Employer Costs release, private industry employers averaged $13.79 per hour in benefits against $32.36 in wages, so benefits ran 29.9 percent of total compensation. Paid leave alone averaged $3.52 an hour, and the DOL's Employment Cost Index for September 2025 put benefit costs up 3.5 percent over the year, faster than most budgets grow.

Health insurance dominates for most small employers. A $450 monthly premium is $5,400 a year, more than every tax line in the worked example combined ($4,750). A 3 percent retirement match adds $1,560 on the $52,000 salary. Neither line is legally required, which is why two $25 an hour hires at different companies can cost $62,150 and $63,710 a year for the same $52,000 of wages. When you compare offers or plan next year's budget, fill the calculator's benefit boxes with your real numbers rather than the averages.

Reading the loaded cost per hour and the multiplier

Two outputs make the number usable. The loaded cost per hour divides total cost by hours worked, so the $63,710 hire over 2,080 hours reads $30.63. Quote that figure when you price a job or bill a client, because the wage line alone ($25.00) quietly leaves the other $5.63 unpaid.

The multiplier, total cost divided by base pay, travels better between positions. The $52,000 example lands at 1.225. A part time bookkeeper at $18.00 an hour for 30 hours a week, with no health insurance and the same tax lines, comes to $30,760.92 of total cost on $28,080 of wages: a 1.095 multiplier, or $19.72 per hour. A role with $1,000 a month of health insurance and an 8 percent match reaches $72,910 a year, a 1.402 multiplier, while lean part time schedules sit near 1.1x. Rules of thumb like "salary times 1.25" fail in both directions, which is why the calculator computes the multiplier from your own inputs.

Five mistakes that throw the budget off

Using the 6.0 percent FUTA gross rate. The gross rate applies only when no credit is claimed. Employers who pay state unemployment on time owe 0.6 percent, so budgeting 6.0 percent on the first $7,000 overstates the line by $378 per employee (5.4 percent of $7,000).

Forgetting the Social Security cap on high earners. Employer Social Security stops at $184,500 of wages, capping that piece at $11,439 (6.2 percent of the base). A $220,000 salary owes no employer Social Security on the last $35,500, so the multiplier shrinks as pay rises past the cap.

Paying benefits on 12 months but wages on fewer weeks. If the position has 4 unpaid weeks, set paid weeks to 48 so health insurance is not charged against hours nobody works.

Skipping the SUTA wage base. State unemployment tax stops once wages pass the state base, so a full year of SUTA on the $52,000 salary at the example base is $210, not $1,560 (3.0 percent of the whole salary).

Pricing jobs off the wage instead of the loaded rate. A contractor quoting at $25.00 when the true hourly cost is $30.63 gives up $5.63 on every billed hour, over $11,700 a year on a full time schedule.

Contractors and employees are not the same bill

An independent contractor paid $25.00 an hour costs you exactly $25.00: no employer FICA, no FUTA or SUTA, and no benefits from your side. That gap is real, but the contractor pays it instead: self-employment tax of 15.3 percent on 92.35 percent of net earnings, their own insurance, and no paid leave. Do not label someone a contractor just to shave the tax lines, because the IRS applies its own tests to the working relationship, and misclassified workers can trigger back taxes and penalties.

For planning, compare loaded hourly figures. An employee at the example rates costs $30.63 per hour worked; a contractor you pay $30.00 per hour for the same output is close to break even before you count recruiting, equipment and reclassification risk. This calculator covers the employee side only, since the contractor side is a single line with no employer add-ons.