Free Tool · 2026 Tax Rates
True Employee Cost Calculator
Most companies underestimate the cost of a new hire by 20–30%. This calculator adds employer payroll taxes and benefits to show what you actually spend per employee per year.
What goes into the true cost of an employee
Gross salary
What the employee earns before deductions. The starting point — but only 70–80% of your total cost.
Social Security (6.2%)
Employer pays 6.2% on the first $176,100 of wages per employee (2026 wage base). Employees pay the same rate — this is the employer share only.
Medicare (1.45%)
No wage cap. Employer pays 1.45% on all wages. There's an additional 0.9% for wages above $200,000, but that's the employee's share.
FUTA (Federal Unemployment)
0.6% on the first $7,000 per employee = $42/year maximum per employee. Small absolute amount but mandatory.
SUTA (State Unemployment)
Varies by state and your unemployment claims history (experience rating). New employers typically pay 2–3% on a state-defined wage base ranging from $7,000 (FL) to $72,800 (WA).
Health insurance
Employer contribution to premiums. National average: ~$700/month for single coverage. This is often the largest non-salary cost for professional roles.
Frequently asked questions
What is the typical cost multiplier for an employee?
Most employers spend 1.25x–1.40x gross salary on total employment cost. At the low end (minimal benefits, lower-wage states): ~1.25x. With full benefits (health, dental, 401k match, PTO accrual): 1.35x–1.50x. High-cost states like California or Washington push the multiplier higher through SUTA wage bases and mandatory benefits.
What employer payroll taxes do I pay?
Four taxes: (1) Social Security: 6.2% up to $176,100. (2) Medicare: 1.45% on all wages. (3) FUTA: 0.6% on first $7,000 ($42/year maximum). (4) SUTA: varies by state and your claims history, typically 1–5% on a state wage base. Total employer payroll taxes run roughly 8–10% of gross wages for most employees.
Does this calculator account for workers' compensation insurance?
No. Workers' comp rates vary enormously by job classification and state (from 0.1% for clerical workers to 10%+ for roofing or logging). Add your workers' comp rate on top of the results above. For office-based roles, typical workers' comp runs 0.2–0.5% of payroll — small but not zero.
How does this compare to a 1099 contractor?
With a 1099 contractor, you pay no employer payroll taxes, no benefits, and no workers' comp. The contractor handles their own self-employment tax (15.3%). This is why contractors often charge 20–40% more per hour than equivalent employees — they're covering costs you'd otherwise pay. The IRS's misclassification rules mean you can't simply pay all workers as contractors; behavioral and financial control tests determine the correct classification.