Employee Cost Calculator

This calculator adds the costs an employer pays on top of salary to show what a hire really costs per year, per month and per paid hour. Business owners use it when budgeting a new role, comparing an employee with a contractor, or setting billable rates that cover staff costs.

The employer payroll tax rate is the one input that needs care. In the US it is mainly the employer half of FICA (6.2% Social Security plus 1.45% Medicare), plus federal and state unemployment taxes, which only apply to the first few thousand dollars of each employee's pay. The calculator applies one flat percentage to the whole salary, so for a quick estimate use roughly 8–10%; the payroll tax calculator breaks the taxes down properly.

Cost per hour divides the total by 2,080 paid hours (40 hours × 52 weeks). Because that includes paid holidays and vacation, the cost per hour actually worked is higher — see the section below. To price your own time the other way round, use the freelance rate calculator.

The "fully loaded" or "burdened" labor cost method is standard in cost accounting and US government contracting. The US Bureau of Labor Statistics' Employer Costs for Employee Compensation survey regularly shows benefits making up roughly 30% of total compensation for private-industry workers. The flat tax percentage overstates costs for high earners above the Social Security wage base, where the 6.2% stops applying.

These are the taxes an employer pays on top of wages. Rates for unemployment insurance and workers' compensation vary by state, industry and the employer's claims history, so check your own notices.

The calculator divides by 2,080 paid hours, but nobody works all of them. Take out paid holidays, vacation and sick days to get productive hours: with 10 holidays and 15 days of PTO, that is 2,080 − 200 = 1,880 hours. The $91,650 hire above then costs $48.75 per hour worked rather than $44.06.

For billable roles, go further: if only 70% of worked hours can be charged to clients, divide by 1,316 hours instead. That is the figure a consultancy or agency needs to beat with its hourly rate.

A contractor's hourly rate usually looks higher, but you do not pay employer payroll taxes, benefits or most overhead on it, and you only pay for hours used. Compare the contractor rate with this page's cost per hour actually worked, not with salary ÷ 2,080. To see what a contractor's hourly rate would equal as an annual figure, use the hourly to salary calculator.

Classification is a legal question, not a cost choice. In the US the IRS and Department of Labor look at how much control you have over how and when the work is done; misclassifying an employee as a contractor can mean back taxes and penalties. Get advice from an accountant or employment lawyer if the role is borderline.

The same method works in other countries with local rates. In the UK, for example, employers pay Class 1 secondary National Insurance (15% on earnings above £5,000 a year from April 2025) and at least 3% of qualifying earnings into a workplace pension under auto-enrolment. Many European countries have higher employer social charges, which pushes the multiplier above the US range.