Free tool
What does an employee really cost?
Enter a wage and your payroll costs. See the true yearly cost and the cost per hour worked, including employer taxes, insurance and benefits.
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How it works
How it works
The total is wages + employer Social Security and Medicare + federal unemployment tax + state unemployment tax + workers' compensation + benefits. Employers pay 7.65% of wages toward Social Security and Medicare. Federal unemployment tax is 6.0% on the first $7,000, less a credit that generally brings the usual net rate to 0.6%.
State unemployment and workers' compensation rates vary, so the defaults here are examples. Replace them with your own.
FAQ
About this calculator
What does an employee really cost?
More than the wage. Employers also pay their share of Social Security and Medicare, federal and state unemployment tax, workers' compensation insurance and any benefits. The calculator adds them up.
What is the employer share of payroll tax?
Employers pay 7.65% of wages toward Social Security (6.2%, up to an annual wage limit) and Medicare (1.45%). Higher wages above the Social Security limit are not taxed for that portion, so check the current limit if wages are high.
What is the federal unemployment tax?
The federal rate is 6.0% on the first $7,000 of each employee's wages, but employers who pay state unemployment tax on time generally receive a credit that brings the usual net rate to 0.6%. The calculator defaults to that.
What are the state unemployment and workers' comp rates?
They vary by state, industry and your claims history. The defaults are examples. Use the rates on your state notice and your insurance quote.
Does this include overtime or paid time off?
No. Enter the hours you actually pay for. Add paid time off or training as an extra cost if you pay for hours that are not productive.
Is anything saved?
No. The math runs in your browser and nothing you enter is sent to us.
Compare with a contractor in the contractor vs employee cost calculator, work out overtime with the overtime pay calculator, or plan the cash with the cash flow calculator. More free tools: Financial Statements Builder Python script, Automated Checkbook Register Python script, Debt Payoff Planner Python script, or see all free tools.
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General information, not tax or legal advice. How we write and check our tools.
Worked example: a $20 an hour employee
These rates are invented to show the steps. Use your own state and insurance rates.
| Item | How | Amount |
|---|---|---|
| Wages | $20 x 40 hours x 52 weeks | $41,600.00 |
| Social Security and Medicare | 7.65% of wages | $3,182.40 |
| Federal unemployment | 0.6% of the first $7,000 | $42.00 |
| State unemployment (example) | 3% of the first $35,000 | $1,050.00 |
| Workers' compensation (example) | 1.5% of wages | $624.00 |
| Benefits (example) | Per year | $3,000.00 |
| Total yearly cost | $49,498.40 |
Spread over 2,080 paid hours that is $23.80 an hour, about 19% above the wage. If the person is productive for 1,920 hours after vacation and holidays, the cost per productive hour is $25.78.
Costs this leaves out
Recruiting, training time, equipment, software and overtime are not in the total unless you enter them under other yearly costs.