Employee Cost Calculator
Calculate the true total cost of an employee including salary, benefits, taxes, and overhead.
Health insurance, dental, vision, 401k match, PTO — typically 20–30% of salary
Employer portion: Social Security (6.2%), Medicare (1.45%), FUTA, SUTA — typically 10–15%
Office space, equipment, software, management time — typically 10–25%
Results update as you type.
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How it works
When businesses hire an employee at a $60,000 salary, the actual cost to the company is rarely $60,000. Once you add employer-side payroll taxes, health insurance, retirement matching, paid time off (which has a cost even though it's not a direct payment), and a share of office space and equipment, the total typically reaches $80,000–$100,000 or more — 1.3 to 1.7 times the base salary. Understanding the true cost per employee is critical for: pricing services correctly (if an employee's time is sold to clients, you must charge enough to cover their total cost), evaluating outsourcing vs. hiring decisions, planning headcount budgets, and understanding why contractors often charge 2–3× an employee's hourly rate. For context, the US Bureau of Labor Statistics found that benefits add approximately 30% on top of wages for private-sector employees. Payroll taxes (employer share of Social Security, Medicare, and unemployment) add another 8–12%. Overhead adds 10–30% depending on the role and company.
Total Cost = Salary × (1 + Benefits% + Payroll Tax% + Overhead%) / 100
Each cost layer is expressed as a percentage of salary and summed, so multiplying the base salary by one plus the combined benefits, payroll-tax, and overhead rates captures every dollar the employer actually spends. Benefits and the employer share of payroll taxes are real cash outlays beyond the paycheck, while overhead assigns the desk, equipment, and management time each role consumes. Adding them together is why fully-loaded cost commonly reaches 1.3 to 2 times the stated salary.
Source:US Bureau of Labor Statistics, Employer Costs for Employee Compensation
We review all our tools from time to time to ensure accuracy.
Worked example
How to use this calculator
- 1
Enter your values
Enter annual salary ($), benefits (% of salary), payroll taxes (% of salary) and overhead (% of salary).
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Total Annual Cost updates instantly as you type — no button to press.
Frequently asked questions
Why does an employee cost so much more than their salary?
Multiple layers of cost stack on top of salary. Employer payroll taxes: Social Security (6.2%), Medicare (1.45%), Federal Unemployment (FUTA, 0.6% on first $7,000), and State Unemployment (SUTA, varies by state) — typically 8–12% total. Benefits: health insurance ($5,000–$20,000/year), dental and vision ($500–$2,000), 401k match (3–6% of salary), paid time off (3–4 weeks = 6–8% of salary effectively). Overhead: desk space, computer, software licenses, HR management, training, and a share of management's time. Total: 1.4–2× salary is common.
What payroll taxes does an employer pay?
Employers pay the following US federal payroll taxes: Social Security tax — 6.2% of wages up to the Social Security wage base ($160,200 in 2023, subject to annual adjustment). Medicare tax — 1.45% of all wages with no cap. Federal Unemployment (FUTA) — 6% on first $7,000 of each employee's wages per year (reduced to 0.6% for most employers who also pay state unemployment). State Unemployment (SUTA) — varies by state and employer experience rating, typically 1–5%. Total employer payroll tax burden: typically 8–12% of wages.
How does this help me decide between hiring vs. using a contractor?
Compare the contractor's rate to the true cost of an employee doing the same work. If you need a developer at $80/hour as a contractor, compare to the true hourly cost of an equivalent employee. A $100,000 salaried developer with 1.5× total cost multiplier = $150,000/year / 2,080 hours = $72/hour actual cost. In this case, the contractor is more expensive per hour. However, contractors offer flexibility (no severance if work ends), no benefits administration, no equipment cost, and expert skills for specific projects. The break-even analysis should factor in project duration, role criticality, and management overhead.
What is a fully-loaded employee cost?
Fully-loaded cost is the total cost to the employer including all direct and indirect costs: salary, all employer-paid taxes, all benefits, recruiting costs (amortized), training costs, equipment and software, office space, management time spent on the employee, and any role-specific costs (tools, travel, licenses). Fully-loaded costs are often 1.5–2.5× the base salary. This metric is used in business cases for new hires, outsourcing decisions, and determining whether a role's revenue generation or cost savings justify its total cost.
How do I use this to price my services?
If you're a services business (consulting, agency, staffing), your pricing must cover fully-loaded employee costs plus profit margin. Formula: minimum billable rate = (fully-loaded annual cost) / billable hours × (1 / target margin). For example, employee with $90,000 true annual cost, 1,600 billable hours/year, targeting 30% margin: minimum rate = $90,000 / 1,600 / (1 − 0.30) = $80.36/hour. In practice, employees are rarely billable 100% of the time — account for utilization rate (billable hours / total hours) which is typically 60–80% for services firms.