True Employee Cost Calculator
Calculate the true cost of hiring an employee including payroll taxes, benefits, and overhead.
Total employer cost is typically 1.25x to 1.4x base salary.
The true cost of an employee is always significantly higher than their base salary. When employers budget only for salary, they routinely underestimate labor costs by 20–40%, leading to cash flow problems and incorrect pricing. This calculator shows the full picture.
Formula: Total Employee Cost = Base Salary + Payroll Taxes + Benefits + Overhead + Training Cost Multiplier = Total Employee Cost ÷ Base Salary
Typical cost components (US employer):
| Component | Typical % of Salary |
|---|---|
| Base salary | 100% |
| Social Security (employer share) | 6.2% |
| Medicare (employer share) | 1.45% |
| Federal unemployment (FUTA) | 0.6% |
| State unemployment (SUTA) | 1–5% (varies by state) |
| Health insurance (employer share) | 8–15% |
| Dental/vision insurance | 1–2% |
| Retirement plan match (401k) | 2–6% |
| Paid time off (loaded cost) | 5–8% |
| Workers’ compensation insurance | 1–5% |
| Office space + equipment | 5–15% |
| HR, recruiting, onboarding | 2–5% |
| Total multiplier | 125–175% |
Worked example: New hire salary: $60,000/year
| Item | Amount |
|---|---|
| Salary | $60,000 |
| Payroll taxes (7.65%) | $4,590 |
| Health insurance | $7,200 |
| 401k match (4%) | $2,400 |
| PTO (3 weeks, loaded) | $3,462 |
| Workers’ comp (2%) | $1,200 |
| Equipment + workspace | $5,000 |
| Total annual cost | $83,852 |
Cost multiplier = $83,852 ÷ $60,000 = 1.40× (40% above salary)
Why this matters for pricing: If you bill this employee out to clients at $75/hour (a 25% margin over their $60 salary-equivalent), you’re actually losing money when the true cost is $84/hr.
Remote work impact: Remote employees typically reduce overhead costs by $3,000–$10,000/year per employee (no office space, utilities, or equipment for common areas).