Employee Cost Calculator

An employee cost calculator answers the question behind every hiring budget: what does a $60,000 person actually cost? This page covers the employer side only. The employee's own withholding comes out of their paycheck and is not an extra expense; the Paycheck Calculator shows that view, and the Payroll Tax Calculator covers the taxes alone.

What an employee really costs

The total has four layers. Wages, including pay for vacation days and holidays. Employer payroll taxes: Social Security and Medicare, which you match, plus federal and state unemployment tax. Insurance and benefits: workers' comp, the employer share of health premiums and retirement contributions. Overhead: laptop, software seats, desk space and training. Only the taxes are fixed by federal law, so the calculator locks those and lets you change everything else. A contractor's invoice is different: it already carries the contractor's own taxes, insurance and equipment, so compare a contractor's hourly rate with the cost per hour worked shown here, never with the base wage.

The employee cost formula

A 40-hour schedule pays for 2,080 hours a year, and a paid day off counts as one fifth of the weekly hours.

Employer payroll taxes for 2026

Medicare has no wage base on either side, and the 0.9% Additional Medicare Tax on wages above $200,000 is withheld from the employee only. The FUTA credit is the line most people miss. Employers who pay state unemployment tax get up to 5.4% off the 6.0% federal rate. In a credit reduction state, one that still owes the federal trust fund for benefit loans, part of that credit is lost: for 2025, Schedule A of Form 940 lists California at 1.2% and the U.S. Virgin Islands at 4.5%. The 2026 rates are set on November 10, 2026. The Department of Labor's preliminary list names California, at 1.5% for its outstanding loan plus an estimated 3.8% add-on unless the state again qualifies for relief, and the U.S. Virgin Islands at 4.8%, which would mean a FUTA rate between 2.1% and 5.9% in California and 5.4% in the Virgin Islands. Because the final figures come late in the year, the calculator accepts any FUTA rate. State unemployment rates are assigned per employer, starting at a new-employer rate and then moving with your layoff history.

Worked example: a $60,000 salaried employee

These are the calculator's defaults: a 40-hour week, single health coverage at the national average employer share, a 3% 401(k) match, workers' comp at 1%, state unemployment at 2.7% on the first $7,000 (an example; your state assigns your rate and sets the wage base), 15 PTO days and 8 holidays.

• Social Security and Medicare: $3,720 + $870 = $4,590.
• FUTA and state unemployment: 0.6% and 2.7% of $7,000 = $42 + $189.
• Workers' comp: 1% × $60,000 = $600.
• Health insurance and 401(k): $7,208 + $1,800.
• Total annual cost: $74,429, or $6,202 a month ($2,862.65 per biweekly pay period), a multiplier of 1.24.

The salary pays for 2,080 hours, but 23 days off remove 184, so the employee works 1,896 hours. The cost per hour worked is $74,429 ÷ 1,896 = $39.26, against a $28.85 base rate and $35.78 per paid hour. Use the worked-hour figure to set prices or to compare with a contractor.

Worked example: a part-time hourly employee

Switch to hourly: $18.00 an hour, 25 hours a week, no health plan or match, 5 PTO days, 6 holidays and workers' comp at 2% for warehouse work. Wages are $18 × 25 × 52 = $23,400. Social Security and Medicare add $1,790.10, FUTA and state unemployment the same $231 as above, and workers' comp $468, for a total of $25,889.10 (multiplier 1.11). A day off is 5 hours here, so 1,245 of the 1,300 paid hours are worked and the cost per hour worked is $20.79. The low multiplier comes from the missing health plan, not lower taxes: unemployment tax alone is 1.0% of these wages versus 0.4% of $60,000.

Total cost at salaries from $40,000 to $200,000

Default assumptions from the first example, computed with the calculator's own code:

The multiplier falls as pay rises because the $7,208 health premium is the same for everyone, and the tax share drops above the Social Security wage base: $14,570 is 7.29% of a $200,000 salary, against 8.04% at $60,000. With family coverage ($18,967) the $60,000 employee costs $86,188, a multiplier of 1.44. A full-time hourly worker at $22.00 an hour ($45,760 a year) costs $58,530.04 with the same defaults: a multiplier of 1.28 and $30.87 per hour worked.

Health insurance, 401(k) and the national benchmark

In AHRQ's Medical Expenditure Panel Survey, the average private-sector premium in 2025 was $9,025 for single coverage, with employees paying $1,817, which leaves $7,208 for the employer. Family coverage averaged $26,281 with a $7,314 employee share, an employer cost of $18,967. Employer-paid premiums and 401(k) contributions are not wages for Social Security, Medicare or FUTA, while the employee's own 401(k) deferrals are. For a broader check, BLS reports what private employers spent per hour worked in June 2026; the last column, computed here, shows each item per dollar of wages.

The national ratio of about 1.43 runs above the calculator's 1.24 because BLS counts paid leave and supplemental pay as benefits on top of wages for time worked, while a salary already contains the pay for days off.

Paid time off and the cost per hour worked

PTO adds no dollar line for a salaried employee, since the salary is paid either way, but it cuts productive hours. In the default example the 184 hours off are worth $5,307.69 of the salary and lift the hourly cost from $35.78 per paid hour to $39.26 per hour worked. BLS reports 11 paid vacation days after one year of service (March 2026) and 8 paid holidays (2025) as private-industry averages. The PTO Calculator values any PTO policy.

How to use this calculator

1. Choose salary or hourly and enter the pay.
2. Set paid hours per week, PTO days and holidays.
3. Keep the 0.6% FUTA rate unless your state has a credit reduction.
4. Enter your state unemployment rate and wage base from your rate notice, and your workers' comp rate ($1.00 per $100 of payroll is 1%).
5. Add the health premium share, the 401(k) match, other benefits and overhead, then read the total, multiplier and line-by-line breakdown.

Who this calculator is for

Small business owners weighing a first hire, managers building a headcount budget, agencies setting billable rates, founders comparing an employee with a freelancer, bookkeepers checking payroll totals, and employees who want to know what a raise or a richer benefit package costs the company.

Key terms

• Labor burden: every cost beyond base wages; $14,429 in the $60,000 example.
• Burden rate and multiplier: the burden as a percent of wages (24.0%) and total cost divided by wages (1.24).
• Fully burdened rate: total cost per hour actually worked.
• Wage base: the yearly wages a tax applies to: $184,500 for Social Security, $7,000 for FUTA.
• Experience rating: how a state sets each employer's unemployment rate from its layoff history.

What changes the result most

• Health insurance: family coverage adds more than all payroll taxes combined on a $60,000 salary.
• Salary level: fixed-dollar items raise the multiplier on lower pay.
• Workers' comp class: premiums are priced by job classification, so office and roofing work carry very different rates.
• Your state: unemployment rate, wage base and any FUTA credit reduction.
• Turnover: each new hire restarts the FUTA and state wage bases.

Tips for budgeting a new hire

• Budget each role at its own multiplier, not one company-wide figure.
• Price services on the cost per hour worked, then add margin; in the default example it is 36% above the base wage.
• Ask your insurer for the workers' comp class code and rate before you hire.
• Recheck every January, when the Social Security wage base and state rates change.

Limitations

The estimate assumes one employee in one state for a full calendar year. It leaves out overtime and bonuses (see the Overtime Calculator), local taxes, state disability and paid-leave contributions, and turnover costs. It applies the 401(k) match to all wages, while real plans match only what the employee contributes, and it ignores employee pre-tax health contributions under a cafeteria plan, which slightly reduce Social Security and Medicare wages.

Related calculators

• Convert pay first with the Salary to Hourly Calculator or the Hourly to Salary Calculator.
• Price night and weekend work with the Shift Differential Calculator.
• Check the FICA split with the FICA Calculator, or your own tax as a freelancer with the Self-Employment Tax Calculator.
• See the revenue a hire must cover with the Break-Even Calculator.

Sources

• IRS: Publication 15 (2026) (rates, wage base, FUTA credit, health plans, 401(k)); Publication 15-B (2026) (cafeteria plans).
• IRS: Schedule A (Form 940) for 2025 (credit reduction states).
• U.S. Department of Labor: FUTA Credit Reductions (actual reductions 2010 to 2025 and potential 2026 credit reductions; final determination on November 10).
• SSA: Contribution and Benefit Base ($184,500 for 2026).
• AHRQ: MEPS-IC Table Series I, 2025 (Tables I.C.1, I.C.2, I.D.1, I.D.2).
• BLS: Employer Costs for Employee Compensation, June 2026 (released September 9, 2026); paid vacation days by service, March 2026; paid holidays, 2025.