Employee Cost Calculator
- Wages
- Payroll taxes
- Benefits
- Other
Each hour of work costs $28.22, not the $21.63 hourly wage.
How the employee cost calculation works
What an employee costs per year and per hour worked once payroll taxes, benefits and overhead are added to the salary.
Start with gross wages
A $45,000 salary is the base, about $21.63 per paid hour at 40 hours a week.
Add employer payroll taxes
Social Security and Medicare are 7.65% of wages, so $3,442.50 here. FUTA is usually $42 per employee (0.6% of the first $7,000), and state unemployment adds your SUTA rate on your state's wage base.
Add benefits and other costs
Health cover, retirement match, equipment and software. $6,000 + $2,000 brings the total to $56,442.50.
Divide by the hours worked
2,080 paid hours minus 10 days off is 2,000 hours, so each hour worked costs $28.22.
Worked example. A $45,000 employee with 7.65% payroll taxes, $6,000 of benefits, $2,000 of other costs and 10 paid days off costs $56,442.50 a year, 1.25× the salary, or $28.22 per hour worked.
Employee Cost FAQ
How much does an employee cost on top of salary?
It depends on your benefits and your state. With the defaults here ($45,000 salary, 7.65% payroll tax, $6,000 of benefits and $2,000 of other costs) the total is $56,442.50, or 1.25× the salary. As a national benchmark, the BLS reports that in June 2026 private industry employers paid $46.89 per hour worked: $32.82 (70.0%) in wages and salaries and $14.07 (30.0%) in benefits. BLS counts paid leave and legally required benefits such as Social Security and unemployment tax as benefits, while this calculator keeps paid leave inside wages and payroll tax as its own line, so the two splits are not directly comparable.
How do I calculate the true cost of an employee?
Add wages, employer payroll taxes, benefits and other costs for a year, then divide by the hours they work.
What is included in employer payroll taxes?
Social Security at 6.2% of wages up to $184,500 in 2026, Medicare at 1.45% of all wages, FUTA at 0.6% of the first $7,000 ($42) after the full 5.4% state credit, and state unemployment (SUTA) at your state's rate. FUTA and SUTA have low wage bases, so they add little as a percentage of higher salaries.
Does the payroll tax rate change for high salaries?
Yes. Social Security stops at the $184,500 wage base in 2026, so on a $200,000 salary the employer pays $11,439 of Social Security plus $2,900 of Medicare, or $14,339. That is about 7.17% of wages, not 7.65%. This calculator applies one flat rate, so enter the blended rate for high earners, or let the payroll tax calculator work it out.
How much is FUTA per employee in a credit reduction state?
For 2025, California had a 1.2% credit reduction, so FUTA was 1.8% of the first $7,000, or $126 per employee. The US Virgin Islands had a 4.5% reduction. Both are on the US Department of Labor's list of potential 2026 credit reduction states, and final 2026 rates are set after November 10, 2026.
Why divide by hours worked rather than paid hours?
Paid holidays and vacation are paid but produce no work, so the real cost of each productive hour is higher.
Should paid time off be added as a separate cost?
No. Paid time off is already inside the salary. The calculator counts it by dividing by fewer hours: 10 days off at 40 hours a week is 80 hours, so 2,000 hours worked instead of 2,080.
Sources: BLS: Employer Costs for Employee Compensation, June 2026 (released 9 Sep 2026) · IRS: Publication 15 (2026), Employer's Tax Guide · IRS: Instructions for Form 940 · US DOL: FUTA credit reductions