A $60,000 salary does not cost an employer $60,000. On top of wages come the employer’s share of Social Security and Medicare, federal and state unemployment taxes, workers’ compensation, health insurance, retirement contributions, equipment and training — and all of it is spread over fewer hours than the employee is paid for. This calculator builds the fully loaded cost of an employee using 2026 federal payroll tax rules.
How to use the employee cost calculator
- Choose annual salary or hourly wage, and enter the pay and hours per week.
- Enter your state unemployment (SUTA) rate and wage base from your state’s notice, and your workers’ compensation rate as a percentage of wages.
- Add the employer’s share of health insurance, the retirement match and other benefits.
- Add yearly overhead for equipment, software, space, recruiting and training.
- Enter paid days off to get the cost per hour actually worked.
Employee cost formula
FUTA is 6.0% of the first $7,000 of wages, reduced to 0.6% when the employer pays state unemployment tax on time — $42 per employee. Employers in a credit-reduction state pay more.
Worked example
A business hires a coordinator at $60,000 a year. SUTA is 2.7% on the first $7,000, workers’ comp is 1% of wages, the employer pays $9,000 toward health insurance, matches 4% in the 401(k), spends $600 on other benefits and $4,000 on equipment, software and training. The employee gets 20 paid days off.
Social Security = 6.2% × 60,000 = $3,720; Medicare = 1.45% × 60,000 = $870
FUTA = $42; SUTA = 2.7% × 7,000 = $189; workers' comp = $600 → taxes and insurance $5,421
Benefits = 9,000 + 2,400 + 600 = $12,000; overhead = $4,000
Total = 60,000 + 5,421 + 12,000 + 4,000 = $81,421 — 1.36 times salary
Hours worked = 2,080 − 160 = 1,920 → $42.41 per hour worked
2026 employer payroll tax rates
| Tax | Employer rate | Wage limit | Source |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | $184,500 | SSA |
| Medicare (HI) | 1.45% | None | IRS Publication 15 |
| Federal unemployment (FUTA) | 6.0%, typically 0.6% after credit | $7,000 | IRS Publication 15 |
| State unemployment (SUTA) | Set by state, varies by employer | Set by state | State workforce agency |
Using the result
- Pricing services. If you bill a client for an employee’s time, your rate must cover the cost per hour worked plus profit — not just the hourly wage.
- Employee or contractor? A contractor’s higher hourly rate may still cost less than an employee once taxes and benefits are counted, but worker classification follows IRS and Department of Labor rules, not cost. Compare with the freelance rate calculator.
- Budgeting a new hire. Add the result to the operating expenses in the startup costs calculator, and run payroll for each pay period with the payroll calculator.
This is an estimate for planning, not tax, legal or HR advice. Local payroll taxes, state paid-leave and disability programs, overtime, bonuses and benefit plan rules can change the total.
Frequently asked questions
How much does an employee cost on top of salary?
Employer payroll taxes alone add about 7.65% for Social Security and Medicare, plus federal and state unemployment taxes and workers' compensation. Health insurance, retirement matching, equipment and training often push the total to roughly 1.25 to 1.4 times salary, though it varies widely by employer.
What payroll taxes does an employer pay in 2026?
Employers pay 6.2% Social Security tax on wages up to $184,500, 1.45% Medicare tax on all wages, and federal unemployment (FUTA) tax of 6.0% on the first $7,000 — usually 0.6% after the state credit, or $42 per employee. State unemployment rates and wage bases are set by each state.
Does the employer pay the 0.9% Additional Medicare Tax?
No. The 0.9% Additional Medicare Tax applies only to the employee's wages above $200,000. The employer must withhold it from the employee's pay but does not pay a matching share.
Why calculate cost per hour worked?
Employees are paid for holidays, vacation and sick days, so the hours they actually work are fewer than the hours they are paid for. Dividing total cost by hours worked gives the real labor cost to use when pricing services or comparing with a contractor.