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True Cost of an Employee
Salary is the small part. Add employer taxes, benefits, overhead, equipment, and the hours they won't actually be productive — then you've got the number.
Catalog No. 105 · Hire-or-Not Calculator
Compensation
Employer taxes & insurance
7.65%
Social Security stops at $184,500 of pay in 2026. Medicare has no cap.
3%
Charged on the first part of each employee's wages only (the state wage base, below). FUTA's 0.6% on the first $7,000 is added on top. SUTA rates vary by state & experience rating.
California's is $7,000 (EDD). Each state sets its own; check yours.
Percent added to FUTA's 0.6% in a state that owes the federal unemployment fund. California: 1.2% for 2025 wages (EDD), rising 0.3% a year until repaid; each year's list is final on Nov 10. Most states: 0.
2%
Office: ~0.3%. Trades: 5-15%. Roofing: 20%+.
Benefits
Overhead & setup
Productivity
70%
True first-year cost
$0
— true hourly cost
Salary multiplier
—
What you actually pay for every $1 of base salary, fully loaded, in the first year.
Cost / productive hour
—
Cost / month
—
Each year after (no one-time costs)
—
Where it comes from
| Base compensation | — |
| + Bonus | — |
| + FICA (7.65%; Social Security capped) | — |
| + SUTA + FUTA | — |
| + Workers' comp | — |
| + Health insurance | — |
| + Retirement match | — |
| + Software / tools | — |
| + Office | — |
| + Equipment (one-time, year 1) | — |
| + Recruiting (one-time, year 1) | — |
| True first-year cost | — |
How it works
Adds employer taxes, benefits, overhead and one-time costs to pay, to show what an employee costs in year one, per month, and per productive hour.
- Base pay = Annual salary, or Hourly rate × Hours per week × 52. Taxable pay = base pay + Annual bonus.
- FICA = 6.2% Social Security on taxable pay up to the wage base for the tax year you pick ($184,500 in 2026, $192,300 in 2027) + 1.45% Medicare on all taxable pay, which has no cap.
- SUTA = SUTA rate × taxable pay up to the State wage base you enter (starts at $7,000). FUTA adds 0.6% on the first $7,000, plus your state's credit reduction if it has one (California: 1.2% for 2025). Workers' comp = rate × all taxable pay.
- First-year cost = base + bonus + FICA + SUTA/FUTA + workers' comp + health × 12 + retirement match + software × 12 + office × 12 + equipment + recruiting.
- Salary multiplier = first-year cost ÷ base pay. Cost per month = first-year cost ÷ 12. Each year after drops the equipment and recruiting one-time costs.
Questions
- Is this payroll or tax advice?
- No. It is a planning estimate from the numbers you enter and the fixed federal rates in the code. It is not tax, legal or payroll advice. Check your state's unemployment rate and wage base and your insurer's quote.
- What is the difference between the two hourly costs?
- True hourly cost = first-year cost ÷ clock hours (2,080 a year if salaried, or Hours per week × 52). Cost per productive hour divides by fewer hours: those hours × (260 − PTO − paid holidays) ÷ 260 × Productive hour %.
- What do the SUTA and workers' comp sliders do?
- SUTA applies to wages only up to the State wage base box. Workers' comp applies to all taxable pay, which is base pay plus bonus. Both rates vary, so enter the ones that apply to you.
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