About the Employee Cost Calculator
This employee cost calculator estimates what a US employee really costs your business in a year — far more than the salary on the offer letter. Enter the salary and any bonus, then your benefits and overhead, and it adds the employer’s share of Social Security and Medicare, federal (FUTA) and state (SUTA) unemployment tax, health insurance, retirement match, workers’ compensation insurance and per-employee overhead such as equipment, software and office space.
Use it before you post a job, when budgeting headcount, when deciding between an employee and a contractor, or when setting billing rates that must cover staff costs. The results include the total annual cost, the cost per month and per working hour (2,080 hours a year), and the cost multiplier over base salary.
Payroll taxes use 2026 figures: 6.2% Social Security on wages up to $184,500, 1.45% Medicare with no cap, and FUTA at 0.6% on the first $7,000 assuming you qualify for the full state credit. SUTA rates and wage bases vary by state and employer history, so enter the rate on your state notice. The 2027 wage base had not been announced when this page was updated.
With the default inputs, the total annual cost is $79,221.00. Change any value above to recalculate instantly.
How to use the employee cost calculator
- 1Enter the annual salary and any expected bonus or commission.
- 2Add the employer share of health and other insurance premiums.
- 3Enter your retirement match and workers’ comp rate.
- 4Enter your state unemployment rate and wage base from your state notice.
- 5Add per-employee overhead such as a laptop, software seats and desk space.
Formula and method
Wages W are salary plus bonus. The employer pays 6.2% Social Security on wages up to the 2026 wage base, 1.45% Medicare on all wages, 0.6% net FUTA on the first $7,000 per employee (after the 5.4% credit for paying state unemployment tax on time), and SUTA at your state rate up to the state wage base.
Benefits add the employer’s share of insurance premiums, the retirement match (a percentage of base salary) and workers’ compensation (a percentage of wages). Overhead covers per-employee equipment, software and space. The hourly figure divides the total by 2,080 paid hours, so it does not account for paid time off reducing productive hours.
- W
- Annual wages (salary + bonus)
- SUTA
- State unemployment rate × min(W, state wage base)
Worked examples
$60,000 salary with standard benefits
Payroll taxes are $3,720 Social Security + $870 Medicare + $42 FUTA + $189 SUTA = $4,821. Health ($7,000), a 3% match ($1,800), workers’ comp ($600) and $5,000 overhead bring the total to $79,221 — about 1.32× salary, or $38.09 per hour.
$200,000 salary above the Social Security cap
Social Security stops at the $184,500 wage base, so it is $11,439 rather than $12,400. Medicare has no cap ($2,900). Because taxes and fixed benefits are a smaller share of a high salary, the multiplier falls to about 1.17×.
$45,000 role with no benefits
Taxes are $2,790 Social Security, $652.50 Medicare, $42 FUTA and 3.4% of $9,500 ($323) SUTA. Adding $225 workers’ comp and $2,000 overhead gives $51,032.50, or about $4,253 a month.
Frequently asked questions
How much does an employee really cost?+
A common rule of thumb is 1.25 to 1.4 times base salary once payroll taxes, benefits and overhead are included. Lower-paid roles with full benefits often exceed that range because health premiums are a fixed dollar amount.
What payroll taxes does an employer pay?+
US employers pay 6.2% Social Security (up to the annual wage base), 1.45% Medicare, federal unemployment tax (FUTA, usually 0.6% on the first $7,000) and state unemployment tax (SUTA). Some states add disability or training taxes.
What is the Social Security wage base for 2026?+
The 2026 Social Security wage base (the SSA contribution and benefit base, confirmed in IRS Publication 15) is $184,500. Employer and employee Social Security tax stops once an employee’s wages for the year reach that amount; Medicare continues on all wages.
Why is FUTA only 0.6%?+
The gross FUTA rate is 6.0% on the first $7,000 of wages, but employers who pay state unemployment tax on time receive a credit of up to 5.4%, leaving 0.6%. Employers in credit-reduction states pay slightly more.
Is it cheaper to hire a contractor than an employee?+
Contractors do not trigger employer payroll taxes or benefits, but they usually charge higher rates and you lose control over how and when work is done. Worker classification is governed by IRS and Department of Labor rules, not by preference.
Tax results are estimates based on published rules and simplified assumptions. They are not tax advice — check official guidance or a tax professional for your situation.