Employee Cost Calculator: The True Cost of Hiring in 2026
Answer first. A US employee usually costs 1.25 to 1.4 times their salary once employer payroll taxes, benefits, paid time off and equipment are added. The employer's legal minimum on top of wages is:
- Social Security: 6.2% of wages up to $184,500 in 2026
- Medicare: 1.45% of all wages
- Federal unemployment (FUTA): usually $42 a year per employee (0.6% of the first $7,000, after the state credit)
- State unemployment: the rate and wage base depend on your state and your company's history
Total annual cost
$76,621.00
1.28 times wages · true hourly cost $36.84
| Wages | $60,000.00 |
| Social Security (6.2% up to $184,500) | $3,720.00 |
| Medicare (1.45%) | $870.00 |
| FUTA (0.6% of the first $7,000) | $42.00 |
| State unemployment (2.7% of the first $7,000.00) | $189.00 |
| Health insurance, employer share | $8,000.00 |
| Retirement match | $1,800.00 |
| Equipment, software and other overhead | $2,000.00 |
Paid time off: 15 days is about $3,461.54 of paid time with no output. It is already inside wages, so it is not added to the total.
Worked example: a $60,000 salary
| Cost | How it's calculated | Annual |
|---|---|---|
| Salary | $60,000 | |
| Social Security | 6.2% × $60,000 | $3,720 |
| Medicare | 1.45% × $60,000 | $870 |
| FUTA | 0.6% × $7,000 | $42 |
| State unemployment (illustrative) | 2.7% × $7,000 wage base | $189 |
| Health insurance, employer share (your input) | $8,000 | |
| 401(k) match | 3% × $60,000 | $1,800 |
| Laptop, software, other | $2,000 | |
| Total | $76,621 |
- That is 1.28 times salary.
- The true hourly cost is $76,621 ÷ 2,080 hours = $36.84, against a $28.85 hourly wage.
- The state unemployment line is illustrative. Rates and wage bases vary widely by state, and the calculator uses yours.
High earners: the Social Security cap matters
For a $200,000 salary:
- employer Social Security stops at the wage base: 6.2% × $184,500 = $11,439, not $12,400
- Medicare has no cap: 1.45% × $200,000 = $2,900
(The extra 0.9% Medicare tax above $200,000 is withheld from the employee. It isn't an employer cost.)
What most calculators leave out
- Paid time off: 15 days of PTO on a $60,000 salary is about $3,460 of paid time with no output ($60,000 ÷ 260 working days × 15). It's a real cost when you plan capacity.
- Time to hire: each week a role sits open costs output. A structured hiring pipeline shortens it.
- Turnover: replacing someone repeats the recruiting, onboarding and ramp-up costs.
FAQ
How do I calculate the cost of an employee?
Add the salary, employer payroll taxes (Social Security, Medicare, FUTA and state unemployment), benefits, PTO and overhead. A quick estimate is salary × 1.25–1.4. The calculator gives you the exact figure.
How much does a $15-an-hour employee cost?
At 2,080 hours, $15 an hour is $31,200 in wages. Required employer taxes add about $2,387 for Social Security and Medicare, plus unemployment taxes. With no benefits, that's roughly $16.20–$16.50 an hour. Benefits push it higher. Use the calculator for your state.
Is it cheaper to hire a contractor?
Contractors carry no employer payroll taxes or benefits, but usually charge more per hour. Misclassifying an employee as a contractor creates tax and legal risk. Classification depends on the working relationship, not the label; see the IRS and Department of Labor guidance.
Planning a hire? Run the whole process in one place.
- Naseej Consulting's platform takes the role from requisition to AI-matched shortlist, interviews and offer.
- It also manages workers, timesheets and approvals afterwards.