Tool
True Cost of an Employee Calculator
Base salary is only part of the cost. Add payroll taxes, benefits, workers’ comp, and overhead to see what a hire really costs.
Results
- Employer payroll tax
- $6,120
- Workers' comp
- $800
- Cost above base salary
- 28.0%
- True annual cost
- $102,420
Employer payroll tax defaults to 7.65% (Social Security + Medicare employer share). Confirm your state SUTA and workers' comp rates.
A worked example — your numbers
Start with the $80,000 base salary, then layer on the employer-side costs:
Payroll tax = $80,000 × 7.65% = $6,120; workers' comp = $80,000 × 1.00% = $800.
True cost = $80,000 + $6,120 + $500 (FUTA/SUTA) + $12,000 (benefits) + $800 + $3,000 (other) = $102,420.
How to read your result
This hire really costs $102,420 a year — about 28.0% on top of the headline salary. Budget the $102,420, not the $80,000.
Use this number, not the salary, when you ask whether a role pays for itself: the revenue or capacity they unlock needs to clear $102,420 with margin to spare. It's also the figure to compare against a contractor's annual cost.
This calculator provides directional estimates for informational purposes only and is not tax, legal, or financial advice. Results depend on the inputs you provide. For advice specific to your situation, book a Discovery Meet.
What this calculator does
A salary is only part of what an employee costs. This tool adds the employer-side expenses most owners underestimate — payroll taxes, benefits, unemployment insurance, workers' comp, and equipment — to show the true annual cost of a hire. It's built for owners deciding whether they can actually afford to add a person, and what to budget beyond the offer letter.
How it works
It starts with base salary, then layers on the employer's share of payroll taxes (Social Security + Medicare is 7.65% by default), federal and state unemployment (FUTA/SUTA), benefits like health insurance and retirement match, workers' compensation as a percent of payroll, and other costs such as equipment, software, and training.
The total is your real annual cost; the 'cost above base salary' shows how much the loaded extras add as a percentage — often 25–40% on top of salary.
Common mistakes
- ·Budgeting the salary, not the loaded cost. The 25–40% on top is real money and it's easy to forget until the bills arrive.
- ·Guessing at state rates. SUTA (state unemployment) and workers' comp vary by state and by your claims history — confirm your actual rates rather than using a placeholder.
- ·Omitting onboarding and ramp. A new hire isn't fully productive on day one; the first months carry cost without full output.
Frequently asked questions
What's the 7.65% payroll tax?+
It's the employer's share of FICA — 6.2% for Social Security (up to the annual wage base) plus 1.45% for Medicare. Employees pay a matching amount from their own wages; this calculator counts only the employer's side.
Why is an employee more than their salary?+
Employers also pay payroll taxes, unemployment insurance, often health benefits and retirement contributions, workers' compensation, and equipment/software. Together these typically add 25–40% on top of base pay.
How do FUTA and SUTA differ?+
FUTA is federal unemployment tax (a small per-employee amount); SUTA is state unemployment tax, which varies by state and by your company's claims experience. Enter your actual annual figure for accuracy.
Should I hire an employee or a contractor?+
Contractors don't carry employer payroll taxes or benefits, but they charge more per hour to cover their own. Compare the fully loaded employee cost here against a contractor's effective annual cost — and remember worker-classification rules are strict. A CPA can help you decide.
Want a real answer, not just a calculator?
A calculator gives you a directional number. A free Discovery Meet gives you a CPA who reviews your actual books, structure, and goals.
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