Employee Cost Calculator (True Cost of a Hire)
Enter the salary and the extra costs your business pays.
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Employee Cost Calculator (True Cost of a Hire) by TheCalcTools
How the Employee Cost Calculator (True Cost of a Hire) works
Employees cost more than their salary: employers pay payroll taxes, benefits, equipment and a share of office and admin costs. A common estimate is 1.25 to 1.4 times salary.
Paid days off reduce productive hours, so the cost per hour of actual work is higher than salary ÷ 2,080.
The formula
Worked example
Using the default values shown in the calculator:
| Gross salary per year | $65000 |
|---|---|
| Employer payroll taxes | 7.65 % |
| Benefits per year (health, retirement match) | $9000 |
| Equipment, software and training per year | $3000 |
| Office and overhead per year | $6000 |
| Paid days off per year (holidays and leave) | 25 |
- A 65,000 salary costs the employer $87,972 a year (1.35× salary).
- That is $46.79 per productive hour.
Result:
| Total cost per year | $87,972 |
|---|---|
| Cost as a multiple of salary | 1.35 |
| Per month | $7,331 |
| Per productive hour | $46.79 |
| Cost above salary | $22,972 |
Frequently asked questions
Is the US employer payroll tax 7.65%?
Social Security (6.2% up to the wage base) plus Medicare (1.45%) is 7.65%; federal and state unemployment taxes come on top.
Sources and further reading
- IRS Publication 15 (Circular E): Employer's tax guide
- U.S. BLS: Employer costs for employee compensation
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This calculator gives estimates for information only. Check important results independently before you rely on them. See our disclaimer.