Employee Cost Calculator (True Cost)

What an employee actually costs

The rule of thumb says 1.25–1.4× salary; the honest count usually lands higher. A $65,000 hire carries ~$4,970 of employer FICA, $7,800–$9,800 in benefits and insurance, $4,000 of equipment and software seats, and amortized hiring costs - a true cost near $85,000, or 1.3× the offer letter before a single unproductive hour. This calculator itemizes each layer so the multiplier is yours, not a folk estimate.

The layers, worst-first

Mandatory: employer FICA (7.65%), federal/state unemployment, workers comp (trades pay 5–15%). Competitive: health insurance ($6–12k/yr small-group), retirement match, PTO you fund but don't receive output from. Operational: software seats that scale per-head, equipment, space. Hidden: recruiting fees and the 3–6 month ramp to full productivity - amortize both over expected tenure or your first-year cost is badly understated.

Why the per-hour line matters most

True cost ÷ 2,080 hours is what to plug into job quotes and capacity math - job pricing with bare wages quietly donates the 30% overhead on every estimate. It's also the honest comparison against contractors: a $50/hr contractor vs a $25/hr employee is much closer than it looks once the employee's true $33/hr and idle time enter the frame.

Workers comp swings the multiplier more than benefits do

The 3% workers comp default hides a huge spread. Carriers price risk by NCCI classification code, not by company: clerical code 8810 often prices near the bottom of the scale, while roofing (5551) and tree care sit among the highest-rated codes in the book, commonly several multiples of the clerical rate. Two $65,000 hires at the same firm, one in the office and one on a roof crew, can carry workers comp lines that differ by thousands of dollars a year even though salary, benefits %, and equipment are identical. If your team spans job types, run each classification through the calculator separately rather than applying one blended rate. A single average understates the field-heavy roles and overstates the desk-heavy ones.

Overtime multiplies the wage, not the burden rate

For non-exempt hourly staff, FLSA overtime applies 1.5× to the base wage for hours past 40 - but fixed costs like insurance premiums and equipment don't shrink to match. A crew member logging 45 hours doesn't cost 1.3× salary on those extra 5 hours; they cost roughly base wage × 1.5, plus payroll tax on the higher total wage, while the benefits and equipment lines stay flat. That decouples the "true hourly cost" figure from overtime weeks: use this calculator for the baseline burdened rate, then run overtime hours through the overtime pay calculator separately rather than multiplying the burdened rate by 1.5, which double-counts the fixed-cost portion.

Short tenure inflates the recruiting line fastest

Amortized recruiting cost is total hiring spend ÷ expected tenure in years, and that denominator moves the number more than people expect. A $3,000 hiring cost spread over a 3-year expected tenure adds $1,000/year to true cost. The same $3,000 spread over an 8-month average tenure - not unusual for entry-level or high-churn field roles - adds closer to $4,500/year, a swing of several points on the multiplier from one input.

Hiring across state lines changes the math

Everything above assumes one employer in one state, and that's not true for a lot of hires anymore. If you're bringing on a remote employee who lives somewhere other than where your business is registered, the SUTA rate this calculator uses as a flat 3% default is set by the state where the employee actually works, not where your company is headquartered.

Practically, that means you generally have to register as an employer in the employee's state, which can involve its own unemployment insurance account and its own rate, sometimes quite different from your home state's, plus state income tax withholding rules that vary by where the work is physically performed. A team hiring across five states can end up managing five separate SUTA rates and five separate registrations, not one blended number. Run each remote hire's true cost with that state's actual SUTA rate rather than the calculator's default whenever the employee is out of state, since the gap between a low-rate and high-rate state can move the multiplier more than most of the other line items combined.

Related tools

Track labor as a share of revenue in the labor cost calculator, model overtime spend with the overtime pay calculator, and see what each hire does to your break-even point.

What the calculator does not include

The tool outputs a loaded labor rate, not a fully-loaded project cost. It excludes equipment depreciation, materials markup, subcontractor margins, and overhead allocation (rent, utilities, software licenses). A shop running $180,000/year in fixed overhead across four technicians adds roughly $21.63/hour per head before any profit margin. Feed the tool's per-hour output into a labor cost calculator to build a full job estimate.

Payroll tax ceilings that change the math mid-year

FUTA applies only on the first $7,000 of wages per employee (6.0% gross, net 0.6% after the 5.4% SUTA credit). Social Security tax stops at $176,100 (2025 wage base). An employee crossing that threshold in month eight cuts your employer FICA cost by $496.20/month for the remainder of the year. Annualized burden rates front-load these costs; monthly cash flow differs materially from the annual average the calculator displays.