An employee costs well beyond the salary once payroll taxes, benefits and overhead are added.
Who this is for: Budgeting a hire at what it really costs.
The salary and what sits on top
What you are paying
$
Gross annual salary before any deductions. It already pays for holidays and paid leave.
% of salary
Optional. BLS supplemental pay (bonuses, overtime premiums, shift differentials) averages 5.7% of pay for full-time private-industry workers. It is wages, so FICA applies to it.
What it adds on top
% of salary
BLS, June 2026: insurance plus retirement average 15.8% of salary for full-time private-industry workers. Use your own plan costs if you know them.
% of wages
FUTA, state unemployment tax and workers’ compensation. BLS, June 2026: 60 cents per hour worked for private-industry workers, about 1.6% of wages.
% of salary
Desk, software, office space, training. An illustration, not a benchmark: divide your indirect costs by headcount for a real figure.
Time off
days
Holidays, vacation and sick days. BLS paid leave is 10.6% of pay for full-time private-industry workers, about 28 of 260 working days.
Total Annual Cost
$84,030
Salary and bonuses + employer FICA + unemployment tax and workers’ comp + benefits + overhead.
Formula verified 27 September 2026
Cost Per Month
$7,003
Monthly cost to the business.
Cost per paid hour
$40.40
Over 2,080 paid hours a year (40 hours × 52 weeks), leave included.
Cost per hour actually worked
$45.27
Over the hours left after paid days off: the figure to compare with a contractor’s hourly rate.
Employer FICA Taxes
$4,590
6.2% Social Security up to the $184,500 wage base + 1.45% Medicare, on salary and bonuses.
Unemployment tax and workers’ comp
$960
FUTA, state unemployment tax and workers’ compensation, at the rate entered.
Health insurance and retirement
$9,480
Your estimated annual benefits spend.
Cost Multiplier
1.40
Total cost ÷ salary. The BLS June 2026 average for full-time private-industry workers works out to 1.31 before any overhead.
The Bureau of Labor Statistics measured full-time private-industry workers at $54.00 an hour worked in June 2026. Only $41.37 of that was pay, $36.97 of wages and $4.40 of paid leave, so employment cost 1.31 times pay before a desk, a laptop or a software seat. The rest was $4.58 of insurance, $3.76 of legally required payroll taxes and insurance, $2.35 of bonuses and premium pay, and $1.94 of retirement contributions.
Total Cost = Wages + FICA(Wages) + (Wages × Other payroll%) + (Salary × Benefits%) + (Salary × Overhead%), where Wages = Salary × (1 + Bonus%)
The spread is wide. The same release puts union workers at 1.49 times pay and nonunion workers at 1.27, and most of the gap is insurance and retirement: $13.78 an hour against $4.52. That is why the calculator takes benefits as your own percentage rather than one blended figure.
6.2% up to the wage base, 1.45% on everything
The employer pays Social Security at 6.2% of wages up to the 2026 wage base of $184,500, and Medicare at 1.45% with no ceiling. Bonuses and premium pay are wages too, so they carry the same 7.65% until the base is reached.
The ceiling makes the multiplier fall as pay rises. Social Security on a $250,000 salary stops at $11,439, so employer FICA is $15,064, 6.03% of the salary rather than 7.65%. On the defaults that hire costs 1.38 times salary against 1.40 for a $60,000 one.
Paid leave costs nothing extra, and makes every hour worked dearer
Holiday, vacation and sick pay are already inside the salary, so they add nothing to the annual total. What they change is the hours you get for it. BLS puts paid leave at 10.6% of pay for full-time private-industry workers, about 28 days of a 260-day year, which leaves 1,856 of the 2,080 paid hours.
On the defaults that turns $40.40 per paid hour into $45.27 per hour actually worked. That second figure is the one to set beside a contractor’s quote or a billable rate, because a contractor’s rate already carries their own time off.
Space, equipment, software and the cost of the people who support them
Overhead is the share of indirect cost each employee consumes: workspace, hardware, software seats, IT and HR support, training, and recruitment spread across the expected tenure. BLS compensation data stop at pay and benefits, so there is no official benchmark for it, and the 15% default is an illustration.
The reliable way to set the figure is to divide total indirect cost by headcount rather than to guess a percentage. A business with $108,000 of annual overhead and twelve staff on an average $60,000 carries $9,000 per head, which is the 15% the default assumes.
Ramp time, recruiting, equity and local levies
Federal and state unemployment tax and workers’ compensation are in the model as one percentage of wages. The real figures depend on your state’s rate and wage base, your claims history and the work itself, so replace the 1.6% default with your own rates when you have them. Local payroll levies, state disability programs and equity grants sit outside it.
Nor does it price ramp time or hiring. A new hire is rarely fully productive for the first months, and recruiting fees fall in the first year only, so add both to the first-year figure when the question is whether a role pays for itself.
Sources & References
Figures on this page are checked against primary, authoritative sources. Links open in a new tab.
FICA uses 2026 employer rates: 6.2% Social Security capped at the $184,500 wage base plus 1.45% uncapped Medicare, on salary and bonuses. There is no employer share of the 0.9% Additional Medicare Tax; it is withheld from the employee only.
Unemployment tax and workers’ compensation are one percentage of wages. Real state rates and wage bases differ, and workers’ comp depends heavily on the occupation.
Paid leave is inside the salary, so it adds no cost of its own; it only reduces the hours worked.
Where it stops
State unemployment tax rates depend on the state and the employer’s history; federal unemployment tax is 6.0% of the first $7,000 of wages, cut to 0.6% ($42) by the full state credit, except in a credit reduction state.
Part-time employees have proportionally lower costs but may not qualify for full benefits.
Ramp time, recruiting fees, equity and local payroll levies are not included.
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Results are estimates for planning and analysis based on the figures you enter. They are not accounting, tax, or financial advice — verify with your own records and a qualified professional before making decisions.
Built and maintained by Jay Sudha, who runs a rice mill and trading business in Kashipur, India, and works with pricing, margins, working capital and bank credit as part of it.
Published the calculator with its formula, worked example, assumptions, limitations and a bespoke guide, and added an automated formula test suite covering it.
Set the defaults from the BLS Employer Costs for Employee Compensation release for June 2026: insurance and retirement at 15.8% of pay, unemployment tax and workers’ compensation at 1.6% of wages, and 28 paid days off.
Added bonuses and premium pay (taxed as wages), unemployment tax and workers’ compensation, and the cost per hour actually worked after paid leave.
Tested employer FICA against the 2026 Social Security wage base, the FUTA figures against IRS Topic 759, and the calculator on BLS full-time shares against the 1.31 multiplier BLS measured.
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