True cost of employee calculator

This works out what an employee actually costs a small employer in a year, and per hour they are actually at work. It starts from the salary, adds the employer's share of Social Security and Medicare at the Internal Revenue Service's published rates, federal unemployment tax after the state credit, state unemployment insurance at the rate and wage base on your state notice, workers compensation from your policy rate, your health contribution and retirement match, and the equipment and training a person needs, then divides the total by the hours left after paid time off and holidays. The salary is the smallest number on the page that matters.

The federal constants are the IRS's, everything else is yours

Three figures on this page are not inputs because they are published law for 2026: the employer's Social Security share of 6.2% on wages up to the $184,500 wage base, the employer's Medicare share of 1.45% with no cap, and federal unemployment tax at 6.0% on the first $7,000 of wages, which falls to 0.6% once the 5.4% credit for paying state unemployment tax is taken, as it is for almost every employer in good standing. Each is cited below from the Internal Revenue Service. State unemployment rates and wage bases, and workers compensation rates, differ by state and by employer, which is why the page asks for them rather than guessing.

Benefits are a third of compensation, on average, and yours may differ

The Bureau of Labor Statistics measured employer compensation for private industry workers at $46.60 per hour worked in March 2026, of which wages were $32.60 and benefits $14.01, so benefits were 30.1 percent of the total. That figure is the reason a salary is never the cost of a hire. The page does not apply the average; it asks for your health contribution, your retirement match and your paid time off, because a small employer's benefits are specific, and the answer it returns is the percentage your own package adds on top of salary.

Productive hours are the divisor that changes the decision

Forty hours a week for fifty-two weeks is 2,080 paid hours, and nobody works them. Take off fifteen days of paid time off and ten holidays and the person is at work for about 1,880 hours, which is the number the true cost should be divided by. That is the hourly figure to compare against a contractor's rate, a second hire, or the price of the software that would let the existing team do the work, and it is usually a good deal higher than the wage on the offer letter.