Employee True Cost Calculator
What an employee really costs you: pay, employer payroll taxes (with the real wage bases), benefits, and overhead — per year, per month, and per productive hour, plus the extra first-year hiring costs.
Ben / Reviewed Sep 27, 2026 / v2.0.0
Results
Showing the numbers you calculated- Cost per year
- $116,105.00
- 1.55× base pay
- First-year cost
- $126,605.00
- Includes $10,500.00 of one-time hiring costs
- Per productive hour
- $68.62
- 1,692 productive hours a year
- Per hour worked
- $61.76
- 1,880 hours after time off
- Per paid hour
- $55.82
- 2,080 paid hours
- Per month
- $9,675.42
- Employer payroll taxes
- $7,205.00
Where the money goes
| Type | Cost | Per year | % of yearly cost |
|---|---|---|---|
| Pay | Salary | $75,000.00 | 64.60% |
| Pay | Bonuses and other cash pay | $5,000.00 | 4.31% |
| Payroll taxes | Social Security (6.2% up to $184,500) | $4,960.00 | 4.27% |
| Payroll taxes | Medicare (1.45%) | $1,160.00 | 1.00% |
| Payroll taxes | Federal unemployment (FUTA, first $7,000) | $42.00 | 0.04% |
| Payroll taxes | State unemployment (SUTA) | $243.00 | 0.21% |
| Payroll taxes | Workers' comp | $800.00 | 0.69% |
| Benefits | Health insurance | $8,500.00 | 7.32% |
| Benefits | Retirement contribution | $2,400.00 | 2.07% |
| Benefits | Other benefits | $2,000.00 | 1.72% |
| Overhead | Workspace, software, and tools | $6,000.00 | 5.17% |
| Overhead | Other overhead | $10,000.00 | 8.61% |
| One-time (first year) | Recruiting | $5,000.00 | — |
| One-time (first year) | Onboarding and training | $3,000.00 | — |
| One-time (first year) | Equipment | $2,500.00 | — |
What this does
A $75,000 employee doesn't cost $75,000. There are payroll taxes on top, benefits, a desk and a laptop, a slice of overhead — and in the first year, the cost of hiring and training them.
This adds it all up: the yearly cost, the first-year cost, and what an hour of their time really costs — which is the number you need for pricing and for deciding whether to hire.
How the math works
yearly cost = pay + employer payroll taxes + benefits + overhead first-year cost = yearly cost + recruiting + onboarding + equipment
Employer payroll taxes are figured on all cash pay, bonuses included, with the real caps: Social Security stops at the year's wage base, and federal unemployment only applies to the first $7,000.
hours worked = paid hours − (PTO + holidays) × hours per day cost per productive hour = yearly cost ÷ (hours worked × productive share)
Paid time off doesn't add cost — you pay for it either way — but it cuts the hours you get, so it raises the cost of every hour worked.
Check my math: a worked example
A $75,000 salary plus $5,000 of bonuses, tax year 2026.
- Cash pay: $80,000.00.
- Employer payroll taxes: $7,205.00 (Social Security, Medicare, federal and state unemployment, workers' comp).
- Benefits: $12,900.00. Overhead: $16,000.00.
- Every year: $116,105.00 — 1.55× base pay. The first year adds $10,500.00 of hiring costs, for $126,605.00.
- Hours: 2,080 paid, 1,880 worked after time off, 1,692 productive — so $68.62 per productive hour.
These numbers come straight from the calculator using its example inputs — if the math ever changes, this example changes with it.
Mistakes I see a lot
- Using base pay to price your work. The loaded cost per productive hour is often 1.5–2× the hourly wage.
- Charging payroll tax on salary but forgetting bonuses.
- Assuming Social Security applies to all pay. It stops at the wage base.
- Counting recruiting and training every year. They're first-year costs.
- Ignoring time off. Fifteen PTO days and ten holidays is five weeks you pay for but don't get.
Questions people ask
- What's a typical burden rate?
- For many small businesses, benefits, payroll taxes, and overhead add 25–40% on top of pay. Add workspace and hiring costs and 1.4–1.6× base pay is common.
- Why isn't the employee's Social Security in here?
- The employee's half comes out of their paycheck — it's already inside their pay. This counts only what the employer pays on top.
- Is a contractor cheaper?
- Often per year, not always per hour — contractors charge more to cover their own taxes and downtime. The Salary to Contractor calculator runs that comparison.
Assumptions and limits
- Employer payroll taxes on all cash pay, bonuses included: Social Security (6.2% up to the year's wage base — $184,500 for 2026), Medicare (1.45%, no cap), and federal unemployment (0.6% net on the first $7,000, assuming the full state credit).
- State unemployment and workers' comp use the rate and wage base you enter — they vary by state, industry, and claims history.
- The retirement contribution is a percentage of all cash pay.
- Hours: paid hours = hours per week × 52. Hours worked subtract paid time off and holidays; productive hours apply your productive share (meetings, admin, and downtime take the rest).
- Recruiting, onboarding, and equipment count once, in the first year. Everything else recurs every year.
- No raises, turnover, or overtime.
Disclaimer: Educational and planning use only. Results depend on what you enter and may not match your lender, your tax return, or professional accounting treatment. Informational content + opinions only — not tax/legal advice.