Employer Cost Calculator
Salary is the part of an employee's cost that appears in the offer letter. This adds the rest — payroll taxes, insurance, retirement, equipment, administration — and divides the total by the hours actually worked.
On this page
What this adds to the salary
An employee costs more than their pay, and the gap is larger than most budgets assume. Four things sit on top:
Payroll taxes. The employer pays 6.2% Social Security and 1.45% Medicare on wages, plus federal unemployment tax and a state unemployment rate assigned to your business. Workers' compensation is usually charged as a percentage of payroll too.
Insurance and retirement. The employer share of health cover is frequently the largest single addition after salary, and a retirement match is real cash out.
Overhead. Payroll administration, HR systems, equipment, software seats, workspace. Small per person and not zero.
Time not worked. Which is not a cost at all, and is treated carefully below.
Why paid time off is not added to the total
It is tempting to add the value of twenty days of leave to the cost of an employee. It is also double counting: a salaried employee is paid the same whether or not they take the leave, and that pay is already in the salary line.
What paid leave actually does is shrink the denominator. The same annual cost spread across 1,920 productive hours instead of 2,080 raises the cost per hour by more than eight percent. That is the honest way to account for it, and it is the figure to use when pricing work or comparing an employee against a contractor.
The state figures we will not guess
State unemployment insurance rates are assigned to individual employers by each state, based on industry and claims history, and they range from a fraction of a percent to several percent on wage bases that differ by state. Workers' compensation rates depend on job classification and can differ by a factor of twenty between an office role and a roofing crew.
There is no national figure for either that could be defaulted without inventing it. Both fields are yours to fill from your state agency notice and your insurance policy, and the results panel says so plainly when they are left blank.
How the total is built
Employer Social Security and Medicare are computed on wages using the same 2026 engine as the payroll tax calculator, so the two pages cannot disagree. FUTA is charged at the 0.6% net rate on the first $7,000 of wages, which is what an employer with the full state credit pays. State unemployment and workers' compensation use your rates. Benefits and overhead are added as entered.
The burden multiplier at the end is the total divided by base salary — a single number for how much more than salary the role costs.
A worked example
A $95,000 salary with a $5,000 bonus, a 2.7% state unemployment rate on a $9,500 base, 0.8% workers' compensation, $14,000 of health cover, $1,200 dental and vision, a $3,800 retirement match, $1,500 of other benefits, $1,400 of payroll administration, and $3,000 of equipment. Twenty-two days of paid leave out of 260 working days.
Payroll taxes come to about $8,161: $6,200 Social Security, $1,450 Medicare, $42 FUTA, and $257 state unemployment. Workers' compensation adds $800. Benefits total $21,300, and overhead $4,400. The all-in cost is about $130,861 — a burden multiplier of 1.38 on the base salary.
Spread over 1,904 productive hours, that is roughly $68.73 an hour. A contractor quoting $75 an hour for the same work is closer to competitive than the $50-an-hour salary equivalent suggests.
Where this differs from the payroll tax calculator
The payroll tax calculator answers a tax question: what FICA and FUTA are owed, split between employer and employee, with the wage bases applied. It is the right page for a payroll filing.
This one answers a budgeting question: what does the whole hire cost. It uses the same tax engine underneath and then adds everything that is not tax. The two are complementary rather than overlapping, and neither restates the other's rates.
What this does not cover
- Recruitment and onboarding. Agency fees, interview time, and the months before a new hire is fully productive.
- Turnover. The cost of a vacancy and of replacing someone.
- Management time. Real, significant, and not a payroll line.
- Local taxes. Some cities and counties levy their own payroll taxes.
- Credits and offsets. Hiring credits and small-employer health credits can reduce the total, and none is applied here.
See our sources for the publications behind the 2026 rates.
Frequently asked questions
What does an employee really cost above their salary?
Commonly between 25% and 40% more, but the range is wide and the drivers are specific: the health plan, the retirement match, the state unemployment rate, and workers' compensation for the job classification.
The burden multiplier this page reports is your own figure rather than an industry average, which is the point of entering the components separately.
Why is FUTA such a small number?
Because it applies to only the first $7,000 of each employee's wages, at a net rate of 0.6% for employers who receive the full state credit. That is $42 a year per employee.
The gross FUTA rate is 6.0%, reduced by a credit of up to 5.4% for timely state unemployment contributions. Employers in credit-reduction states pay more.
Should I include paid time off as a cost?
Not as an addition to the total — the salary already covers it. Include it by reducing productive hours, which is what raises the cost per hour.
Adding it separately would count the same money twice and overstate the cost of every employee who takes leave.
Why does the calculator not fill in my state unemployment rate?
Because it is assigned to your business individually, based on your industry and your claims history, and it changes. There is no national figure that would be true for you.
Your state workforce agency sends the rate each year, along with the taxable wage base, which also differs by state.
How does this compare with hiring a contractor?
The cost-per-productive-hour figure is the right basis for that comparison, because a contractor rate is quoted per hour and includes their own taxes, insurance, and unbilled time.
Compare it against a contract rate, and look at the 1099 vs W-2 calculator for the same question from the worker's side.
Does this work for hourly employees?
Yes — enter the annualized wage cost, including expected overtime, as the base compensation. The tax and benefit arithmetic is identical.
Paid leave often works differently for hourly staff, so adjust the paid-time-off days accordingly.
Related calculators
This calculator is provided for general educational and estimation purposes only and is not tax, legal, accounting, or employment advice. State unemployment and workers' compensation rates are assigned individually to each employer and are entered by you. Consult a payroll professional before relying on these figures for budgeting or pricing.