Employee Cost Calculator

The true cost of an employee is typically 1.25x to 1.4x their base salary. Beyond salary, employers pay for payroll taxes (7.65% FICA), health insurance ($7,000-$22,000/year), workers compensation, retirement contributions, equipment, office space, training, and onboarding costs.

In the US, employers pay 6.2% Social Security tax (on the first $168,600 of wages in 2025), 1.45% Medicare tax (no cap), federal unemployment (FUTA) at 0.6%, and state unemployment (SUTA) which varies by state from 0.5% to 5.4%. Total employer payroll tax is typically 7.65-13% of salary.

Divide total annual employee cost (salary + benefits + taxes + overhead) by annual working hours (typically 2,080 for full-time). An employee earning $60,000 with a 1.35x multiplier costs $81,000/year or about $38.94/hour. This helps compare employee costs to contractor rates.

Small businesses spend an average of 20-30% of salary on benefits. Health insurance is the largest cost at $6,000-$16,000 per employee annually. Other costs include dental/vision ($500-$1,500), retirement match (3-6% of salary), PTO (built into salary cost), and life/disability insurance.

Contractors have higher hourly rates but no benefits, payroll taxes, equipment, or overhead costs. An employee at $60,000 salary costs ~$81,000 total. A contractor doing the same work at $50/hour for 2,080 hours costs $104,000 but with no management overhead. Part-time or project needs often favor contractors.