Employee Cost Calculator
Hiring an employee costs more than the salary on the offer letter. This calculator adds employer payroll taxes (FICA at 7.65%, FUTA at 0.6% on the first $7,000, and state unemployment), benefits such as health insurance contributions and retirement matching, and overhead costs such as office space and equipment. The result is the total annual cost and the cost multiplier compared to base salary. Use this when budgeting headcount, comparing employee versus contractor costs, or setting billing rates.
Employee cost formula
FICA = Salary x 7.65%
FUTA = 0.6% x min(Salary, $7,000) = max $42
SUI = State rate x min(Salary, state wage base)
Benefits = Health insurance + (Salary x Retire%) + Other
Total cost = Salary + FICA + FUTA + SUI + Benefits + Overhead
Multiplier = Total cost / Salary
Understanding payroll taxes
The employer pays 6.2% Social Security tax on wages up to the Social Security wage base ($176,100 in 2025) and 1.45% Medicare tax on all wages, totalling 7.65% FICA. The employer also pays FUTA at a net 0.6% rate on the first $7,000 of each employee's wages. State unemployment insurance (SUI) rates vary widely by state and employer experience rating.
Employee cost calculator: frequently asked questions
What is the true cost of an employee?
The true cost of an employee is the base salary plus employer payroll taxes (FICA, FUTA, SUI), benefits (health insurance, retirement match), and overhead (office space, equipment, HR allocation). This typically totals 1.25x to 1.40x the base salary.
What is FICA and who pays it?
FICA is the Federal Insurance Contributions Act tax. The employer pays 6.2% Social Security (up to the wage base) and 1.45% Medicare on each employee's wages. The employee also pays the same amounts, but the employer portion is an additional cost beyond the salary.
What is FUTA?
FUTA is the Federal Unemployment Tax Act. Employers pay 6% on the first $7,000 of each employee's wages, but most employers qualify for a 5.4% credit, resulting in a net rate of 0.6%, or $42 per employee per year.
What is the typical cost multiplier?
Most sources estimate 1.25x to 1.40x base salary for a fully loaded employee cost. A $60,000 salary may cost $75,000 to $84,000 in total. High-benefit roles or expensive office markets can push this above 1.50x.
Should I include training costs?
First-year training and onboarding costs can be significant, often 10-20% of salary. They are not included in this steady-state calculator, but you should factor them into your hiring budget separately.
Official sources
- IRS: Understanding employment taxes.
- IRS: Form 940, FUTA.
- U.S. Department of Labor: FUTA and SUI overview.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.