How it works
An employee's cost to the business is salary plus a stack of employer-paid taxes and benefits the employee never sees. The engine adds the employer's share of FICA (7.65% matching Social Security and Medicare), FUTA (federal unemployment, normally 0.6%), SUTA (state unemployment, averaging near 2.7% but varying widely), workers' compensation (a percent of payroll set by industry risk), and benefits like health premiums and retirement matches. The payroll tax sum typically runs 10-15% of salary, and benefits add 15-30% more — so a $75,000 hire costs roughly $95,000-105,000 all-in, a number that reshapes staffing, pricing and outsourcing decisions. The engine is equally useful in reverse: a contractor billing $90/hour effectively costs what a salaried employee does at around $140-160k of salary, and this tool is the comparison that makes the trade visible. Every field in this calculator exists for a reason. Enter Annual salary, Employer FICA rate, FUTA rate, SUTA rate, Workers' comp rate, All inputs stay in your browser. Adjust one field at a time to see which lever moves the answer most — the formula on this page lets you verify every step against the defaults shown in the worked example.
Formula
Total cost = salary + salary x (FICA + FUTA + SUTA + workers' comp)% + benefits
Tips
- A $90k hire with benefits realistically costs $115k+ — budget the all-in number, not the salary.
- SUTA rates depend on your history: fewer layoffs mean a lower rate over time.
- Contractors cost more per hour but zero payroll taxes and benefits — run the comparison at your real numbers.
- Workers' comp varies by industry by a factor of ten; your broker's quote is the rate to use.
Frequently asked questions
- What taxes does an employer pay on payroll?
- The employer share of FICA (7.65% — Social Security 6.2%, Medicare 1.45%), FUTA (0.6% after credits), SUTA (state unemployment, roughly 1-8% by state and history), and workers' compensation insurance. Together typically 10-15% of salary on top of the wage itself.
- Why is my employee's cost so much higher than their salary?
- Because payroll taxes (10-15%) and benefits (health insurance, retirement matches, PTO — often 15-30%) all ride on top of the wage. The all-in cost is the real number for budgeting, pricing and hiring decisions.
- How does contractor vs employee cost compare?
- Contractors cost a higher hourly rate but no payroll taxes, benefits, or employment liability. The rule of thumb: a contractor at $X/hour is comparable in cost to an employee at roughly $1.5-1.8X annualised — run your numbers through this tool both ways.
- What are the benefits costs I should include?
- Health insurance premiums (employer share), retirement matches, paid time off, bonuses, training, equipment and other perks. The engine takes your annual total as one number; keep the list honest or the 'true cost' is an underestimate.