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Employee cost calculator: what a hire really costs

The short answer

An employee costs more than their pay. You pay 7.65% in Social Security and Medicare, plus federal and state unemployment, workers’ comp, benefits and paid time off. At $20 an hour full time, that’s $41,600 in pay, and about $50,400 on this page’s example numbers. BLS reports benefits at 30% of total compensation for private industry workers.

Thinking of hiring? Enter the pay and your own insurance and benefit numbers to see the whole cost, and what you pay per hour actually worked.

What it costs you each year

$50,442

21.3% on top of $41,600 in pay. That’s $4,204 a month, or $25.74 for each hour actually worked.

Pay: $41,600
Social Security and Medicare (your share): $3,182
Federal unemployment: $42
State unemployment: $270
Workers’ comp: $1,248
Benefits: $3,600

How it works

What goes into the cost

Federal employer costs
Cost	Your share	Limit
Social Security	6.2%	Wages up to $184,500 in 2026
Medicare	1.45%	No limit
Federal unemployment (FUTA)	6.0%, often 0.6% after the state credit	First $7,000 per employee

Sources: IRS Topic 751 (opens in a new tab) for Social Security and Medicare, and Topic 759 (opens in a new tab) for FUTA. The 0.6% rate applies only if you pay your state unemployment taxes in full and on time, and your state isn’t subject to a credit reduction. The state and workers’ comp numbers in the calculator are examples, because they differ by state and by job.

For comparison, the Bureau of Labor Statistics reports (opens in a new tab) that private industry employers paid $46.89 per hour worked in June 2026: $32.82 in wages and $14.07 in benefits, or 30% of the total.

Before you hire for one job

If the job is mainly answering the phone, compare it with the answering service cost calculator. This is only a planning tool, and it isn’t tax advice. Ask your accountant about your state’s rates.

Common questions

How much does an employee really cost?

Add pay, your 7.65% of Social Security and Medicare, unemployment taxes, workers’ comp, benefits, paid time off and equipment. Your own numbers decide the total, so use the calculator.

What’s labor burden?

The costs on top of pay, shown as a percent. If someone earns $40,000 and those costs are $10,000, your labor burden is 25%. The calculator shows yours.

What taxes does an employer pay?

Federally, 6.2% Social Security up to the wage base, 1.45% Medicare and FUTA on the first $7,000. States add unemployment tax, and some add other payroll taxes.

Is workers’ comp required?

Most states require it once you have employees, with some exceptions. Rates depend on the job and your state, so ask your state or your insurer.

Why show the cost per hour worked?

Paid time off means you’re paying for hours nobody works. Dividing the whole cost by the hours worked shows what each one really costs, which matters when you set prices.

More free tools

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Answering service cost calculator
Work out a monthly bill from your calls and call length, and compare it with a receptionist on payroll.
Overtime calculator
Work out a week’s pay with time and a half, under the rule you choose.

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