Employee Cost Calculator
Salary is just the starting point. Enter the full picture — payroll taxes, benefits, insurance, and other costs — to see what this employee truly costs your business.
Base Salary
$
Additional Employee Costs
Health, dental, vision, 401(k) match, wellness
$
Workers' comp, liability, professional indemnity
$
Equipment, training, software, recruiting, office
$
True Cost Dashboard
Total Annual Cost
—
per year to employ
Monthly Cost
—
per month average
Cost Multiplier — true cost vs base salary
—
times the annual salary
Payroll Tax Cost
—
employer FICA + payroll
Benefits Cost
—
annual employer cost
Insurance Cost
—
annual coverage
Cost Breakdown
Why Employees Cost More Than Salary
The True Cost Formula
Beyond salary, every employer pays FICA taxes, unemployment insurance, workers' comp, benefits, and indirect costs like equipment and office space. The true cost is typically 1.2–1.4× the base salary.
True Cost = Salary + Tax + Benefits + Insurance + Other
Employer Payroll Taxes
Employers must match the employee's Social Security (6.2%) and Medicare (1.45%) contributions — totalling 7.65% of gross wages. Add FUTA (0.6% on first $7,000) and SUTA (varies by state) for the full tax burden.
FICA Employer = 6.2% SS + 1.45% Medicare
Benefits Are a Significant Cost
Health insurance alone averages $6,000–$8,000 per year per employee for employer contributions in the US. Add dental, vision, life insurance, 401(k) matching, and PTO — and benefits often exceed $10,000 annually per full-time employee.
US Average Benefits: ~$12–15K / year
Hidden Costs Add Up Fast
Equipment, software licences, recruiting fees, onboarding, training, desk space, and management time are real costs. A fully-loaded employee often costs 1.4–1.6× base salary once everything is accounted for properly.
Loaded Cost = Salary × 1.2 to 1.6×
Business Examples
Office Admin
$45,000 Salary
7.65% FICA · $4,000 health · $1,500 workers' comp · $1,000 equipment
True cost ≈ $55,943/yr
Software Developer
$110,000 Salary
7.65% FICA · $8,000 health · $2,000 insurance · $5,000 equipment/software
True cost ≈ $133,415/yr
Field Technician
$55,000 Salary
8.25% payroll tax · $3,500 benefits · $4,000 workers' comp · $2,000 tools/vehicle
True cost ≈ $69,038/yr
Marketing Manager
$75,000 Salary
7.65% FICA · $6,000 health · $1,800 insurance · $3,000 tools/training
True cost ≈ $91,538/yr
Why employers underestimate the cost of hiring
- Salary is the number everyone sees. Job postings, offer letters, and budgets focus on salary. But every dollar of salary carries an automatic 7.65% employer FICA tax on top — before any benefits are counted.
- Benefits costs are rising rapidly. Health insurance premiums increase 5–10% per year on average. An employee you hired at $50,000 with $5,000 in benefits today may cost significantly more by year three without a salary change.
- Recruiting and onboarding are expensive. The cost to hire and onboard a new employee averages 20–50% of their first-year salary when you factor in job ads, recruiter time, background checks, training, and the productivity ramp-up period.
- Workers' comp rates vary by risk. A desk worker pays 0.2–0.5% of wages. A construction worker may pay 5–15%. Always use your actual industry rate, not a generic estimate.
- Turnover multiplies these costs. If an employee leaves within a year, you pay most of these costs again. The true cost of poor retention isn't just salary — it's all the overhead, recruiting, and training costs repeated.
Frequently Asked Questions
Start with 7.65% for FICA alone (6.2% Social Security + 1.45% Medicare). Then add FUTA at 0.6% (on first $7,000 of wages) and your state unemployment rate (SUTA varies from 0.1% to 10%+ depending on your state and experience rating). A combined rate of 8.5–10% is common for most small businesses.
Common items include: laptop/computer and peripherals, software licences and subscriptions, mobile phone allowance, office space allocation (rent per desk), recruiting and onboarding costs amortised over tenure, ongoing training and development, uniforms or PPE, and any vehicle or travel allowance. For remote employees, you might also include a home office stipend.
A common rule of thumb is to charge clients 2–3× the employee's fully-loaded hourly cost. This covers overhead, profit margin, non-billable time, slow periods, and the cost of acquiring and servicing the account. Divide total annual cost by 2,080 working hours (or actual billable hours), then multiply by your target multiplier.
On paper, yes — you avoid payroll taxes, benefits, and many overhead costs with a 1099 contractor. However, contractors typically charge higher hourly rates to compensate for their own tax burden and lack of benefits. For short-term or specialised work, contractors are often cost-effective. For long-term, full-time roles, employees tend to be more economical once the relationship value is factored in.
Run this calculator for each planned hire and use the monthly cost figure in your operating budget. Compare it to the revenue the employee is expected to generate or enable. As a rule of thumb, a revenue-generating employee should produce 3–5× their total cost in revenue. Use the annualised figure when evaluating whether you can sustain a hire long-term.