Free tool · Money & pricing
Employee cost calculator
An employee costs more than their wage. On top of pay, US employers owe 7.65% FICA (6.2% Social Security up to the wage base and 1.45% Medicare), federal and state unemployment tax, workers' compensation and any benefits. Enter a wage to see the true annual cost, the cost per hour actually worked and the burden percentage.
True annual cost
$50,437
21.2% on top of gross wages of $41,600.
- Social Security (6.2%)
- $2,579
- Medicare (1.45%)
- $603
- FUTA (0.6% of first $7,000)
- $42
- State unemployment
- $189
- Workers' comp
- $624
- Benefits
- $4,800
- Cost per hour actually worked
- $25.73
- Monthly cost
- $4,203
2026 Social Security wage base $184,500. FUTA assumes the full state credit. Estimates, not payroll or tax advice.
Formulas (employer side, 2026)
- Wages = Hourly rate × Hours per week × 52 (or annual salary)
- Social Security = 6.2% × min(Wages, $184,500); Medicare = 1.45% × Wages
- FUTA = 0.6% × min(Wages, $7,000) (6.0% minus the maximum 5.4% state credit)
- SUTA = SUTA rate × min(Wages, State wage base); Workers' comp = Comp rate × Wages
- True annual cost = Wages + Social Security + Medicare + FUTA + SUTA + Workers' comp + Benefits per month × 12
- Hours worked = Hours per week × 52 − Paid time off hours; Cost per hour worked = True annual cost ÷ Hours worked
- Burden % = (True annual cost − Wages) ÷ Wages × 100
Worked example: a $20/hour full-time employee
Wages: $20 × 40 hours × 52 weeks = $41,600.
- Social Security (6.2%): $2,579.20
- Medicare (1.45%): $603.20
- FUTA (0.6% of $7,000): $42
- SUTA at a hypothetical 3% on a $10,000 state wage base: $300
- Workers' comp at a hypothetical 1.5% of payroll: $624
- Health benefits at $400 a month: $4,800
True annual cost is $50,548, a 21.5% burden on top of wages. With 16 paid days off (128 hours), the employee works 1,952 hours, so each hour actually worked costs $25.90 — not $20.
Where each number comes from
FICA: the IRS lists the employer share as 6.2% for Social Security and 1.45% for Medicare. Social Security stops at the annual wage base ($184,500 for 2026); Medicare has no cap. The 0.9% Additional Medicare Tax on high earners is withheld from the employee and has no employer match.
FUTA: 6.0% on the first $7,000 of each employee's wages, reduced by a credit of up to 5.4% when you pay state unemployment tax in full and on time — leaving 0.6%. Employers in a credit reduction state pay more.
SUTA and workers' comp: set by your state and insurer. New employers usually get a standard SUTA rate from the state, and workers' comp premiums depend on job classification. Enter your actual rates.
Costs this calculator does not include
Retirement plan matches, payroll software, recruiting, training, equipment and the time you spend managing. Some states and cities also require paid sick leave or have their own payroll taxes. This page is general information, not tax or legal advice — confirm your obligations with your state agency or a payroll provider.
Frequently asked questions
How much does an employee really cost?
Add wages, the employer's 7.65% FICA, federal and state unemployment tax, workers' comp and benefits. In the worked example above, a $20/hour employee with $400 a month of benefits costs 21.5% more than their wages; your figure depends on your state rates and benefits.
What payroll taxes does an employer pay?
Federally: 6.2% Social Security (up to the annual wage base), 1.45% Medicare and FUTA, usually 0.6% on the first $7,000 per employee after the state credit. States add unemployment tax and sometimes other payroll taxes.
How do I calculate labor cost per hour?
Divide the employee's true annual cost — wages plus taxes, insurance and benefits — by the hours they actually work, which is scheduled hours minus paid time off.
Is it cheaper to hire a contractor than an employee?
A 1099 contractor does not carry employer payroll taxes or benefits, but they usually charge more per hour, and the IRS and states decide worker classification by how the work is controlled, not by preference. Misclassification can bring back taxes and penalties.