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Employee Cost Calculator

Updated · By the CalculatorDash editorial team · How we check our maths

Quick answer

An employee usually costs 1.25 to 1.4 times their salary. A $60,000 hire with 7.65% employer payroll tax, $7,200 of health cover, a 4% retirement match and $4,000 of equipment and software costs about $78,000 a year, or about $41 per hour actually worked.

True cost of an employee

$
% of salary
$
% of salary
$
days

Total yearly cost

$78,190

Cost as a multiple of salary
1.3
Monthly cost
$6,516
Cost per hour worked
$40.72
Cost on top of salary
$18,190

Excludes office space, recruiting and management time, which can add significantly more.

How this calculator works

Salary is only the starting point. Employers also pay payroll taxes, benefits such as health insurance, retirement contributions, and the tools a person needs to do the job. Together these typically add 25–40% to the salary in the US, and similar amounts elsewhere through provident fund, gratuity and insurance.

Paid time off matters too. Someone paid for 260 working days who takes 20 days off works about 1,920 hours a year, so the true cost per productive hour is higher than salary ÷ 2,080.

Use this before hiring to decide whether a full-time role, a part-timer or a contractor makes more sense, and when pricing your services, since the hourly cost of your staff is the floor under your rates.

The formula

Total cost
salary × (1 + payroll tax % + retirement match %) + benefits + equipment
Hours worked
(260 working days − paid days off) × 8
Cost per hour
total cost ÷ hours worked

Worked example

$60,000 plus 7.65% payroll tax ($4,590) and a 4% match ($2,400), plus $7,200 health and $4,000 equipment, totals $78,190, or 1.30× salary. With 20 days off the person works 1,920 hours, so the cost is about $40.72 per hour worked.

Tips

  1. 01Budget for recruiting and onboarding: the first few months are rarely fully productive.
  2. 02Compare with a contractor's rate only after adding the contractor's lack of benefits and your management time.
  3. 03Revisit the numbers yearly; benefit premiums tend to rise faster than salaries.

Frequently asked questions

How much does an employee cost on top of salary?

Typically 25–40% more in the US once payroll taxes, benefits and equipment are included.

What are employer payroll taxes in the US?

6.2% Social Security (up to a wage cap) and 1.45% Medicare, plus federal and state unemployment taxes.

Is a contractor cheaper than an employee?

Often per year, because there are no benefits or payroll taxes, but the hourly rate is higher and classification rules must be followed.