Employee Cost Calculator

Frequently Asked Questions

What payroll taxes does an employer pay?

Employer-side taxes (2025): Social Security 6.2% (up to $168,600 wage base), Medicare 1.45%, FUTA 0.6% (federal unemployment), state unemployment (varies 0.5-6%). Total ~8-15% on top of salary. Employees pay matching SS/Medicare separately.

What's the true cost of an employee?

Budget 1.25x to 1.4x the base salary as the fully loaded cost. The overhead breaks down roughly as follows: FICA taxes add 7.65% (6.2% Social Security plus 1.45% Medicare), employer-sponsored health insurance runs $8,000-$15,000 per year depending on coverage tier, a 401(k) match of 3-6% adds another layer, and workers compensation insurance typically adds 1-3% depending on the job category. Factor in PTO accrual, equipment, software licenses, and shared office overhead and the multiplier reaches 1.4x for knowledge workers in high-cost markets.

Are payroll taxes deductible?

Yes - employer-paid payroll taxes are deductible business expenses. Employee-paid payroll taxes are NOT deductible (they reduce gross-to-net pay but not employer taxable income). 1099 contractors pay both halves themselves (15.3% self-employment tax).

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Business Information Disclaimer: Estimates only. Not professional business advice.

This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.

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How This Calculator Works

This builds the fully loaded cost of an employee from base salary upward. It annualizes monthly health, dental, and vision premiums (×12), applies percent-of-salary costs for the 401(k) match, FICA, unemployment (FUTA/SUTA), and workers' comp, and adds the implied cost of PTO (salary ÷ 260 working days × PTO days). Total employer cost = salary + all of the above, and the cost multiplier = total ÷ salary - the number that tells you what each dollar of salary actually costs you.

The 1.25–1.4× Rule

For most US employees the true cost lands at 1.25× to 1.4× base salary. A $75,000 hire typically costs $94,000–$105,000 once mandatory taxes and benefits are loaded. FICA alone is a fixed 7.65% (6.2% Social Security up to the wage base + 1.45% Medicare). Health insurance is the biggest variable lever - employer premiums commonly run $6,000–$15,000+ per employee per year. The multiplier climbs higher for richer benefits, generous PTO, or roles with equipment, training, and facility costs not captured here.

What This Model Leaves Out

Recruiting & onboarding: agency fees, hiring time, and ramp-up can equal 20–50% of first-year salary - a one-time cost not in the multiplier.

Overhead: office space, software seats, hardware, IT, and management time - often $5,000–$15,000+ per head.

Bonuses, equity, and raises - add these to base before running the numbers for accuracy.

The PTO figure is a productivity proxy, not extra cash out the door - it shows the cost of paid non-working time, useful for true hourly cost.

Using It for Decisions

Divide total cost by expected productive hours (2,080 minus PTO and holidays, then minus realistic non-billable time) to get a true internal hourly cost - the floor for billing rates, build-vs-buy, and contractor comparisons. A contractor at $90/hr can be cheaper than a $120k salaried hire once the full multiplier and overhead are loaded. Use the multiplier when budgeting headcount: never plan with raw salary - budget the loaded number.

Common Mistakes

Budgeting headcount at base salary and missing 25–40% of the real cost.

Forgetting employer-side payroll taxes are on top of what the employee sees withheld.

Ignoring state-specific SUTA and workers'-comp rates, which vary widely by state and role risk class.

Comparing a contractor's rate to salary alone instead of to fully loaded cost - the only fair comparison.

Employee Cost Calculator

Frequently Asked Questions

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