How to use this calculator
An offer letter shows salary, but the company pays a good deal more. Employer payroll taxes, health insurance, retirement contributions, workers' compensation, and the laptop and software licenses all come on top. Founders and finance teams often budget a new hire at salary alone, then find the real cost runs 20 to 40 percent higher.
Enter the salary and your benefit costs. The calculator applies 2026 federal payroll tax rules and your state rates, and shows the total cost, the multiple of salary, and the cost per paid hour. It's useful for hiring plans, contractor comparisons, and the case for a PEO when benefits are expensive. Our workforce planning guide shows how to build these numbers into a headcount plan.
- Enter the annual salary or expected wages.
- Enter the employer's yearly share of health, dental, and vision premiums.
- Enter the retirement match as a percentage of pay.
- Enter your state unemployment rate and wage base, your workers' compensation rate, and other per-employee costs.
How it's calculated
Social Security = 6.2% of wages up to the 2026 wage base of $184,500
Medicare = 1.45% of all wages. The extra 0.9% Medicare tax on wages over $200,000 is paid only by the employee.
FUTA = 0.6% of the first $7,000 of wages, assuming the full state credit
SUTA = your state rate x wages up to your state's wage base
Workers' compensation = rate x wages / 100
Total cost = wages + payroll taxes + benefits + retirement + workers' compensation + other costs
Worked example
A startup in Georgia is hiring an operations coordinator at $65,000. Employer payroll taxes come to $5,203.50: $4,030 for Social Security, $942.50 for Medicare, $42 for FUTA, and $189 for state unemployment. Health benefits add $8,000, a 3 percent match adds $1,950, workers' compensation adds $325, and a laptop and software add $2,500.
The total is $82,978.50, or 1.28 times salary, about $39.89 per paid hour. That's the number to compare with a contractor's rate or an agency quote, not $31.25 an hour.
Rules to know
The Social Security wage base for 2026 is $184,500, announced by the Social Security Administration in October 2025. FUTA is 6.0 percent of the first $7,000 of wages, reduced to 0.6 percent by the state credit for most employers. In credit reduction states, which the Department of Labor announces each November, the effective FUTA rate is higher. State unemployment rates and wage bases differ widely, and new employers usually get a set starting rate.
Health premiums vary by plan, region, and family coverage. The KFF Employer Health Benefits Survey is a good annual source for national averages. For a cost-per-employee view across the whole company, compare HRIS and benefits administration tools that report total rewards.
This is general information for US employers, not legal or tax advice. Rates and rules change and vary by state and city, so confirm current figures with the agency or a qualified advisor.
Common mistakes
- Budgeting new hires at salary only.
- Applying Social Security tax to wages above the annual wage base.
- Including the employee's share of FICA as an employer cost.
- Comparing an employee's total cost to a contractor's rate without adding the contractor's own overhead and risk.
Email templates that go with this
Once you have the number, these templates help you explain it to employees, candidates, or managers.
Where to go from here
A calculator answers one question. The right process and software keep the numbers right every pay period.
Frequently asked questions
How much does an employee cost beyond salary?
What payroll taxes does the employer pay?
Is PTO an extra cost?
Is a contractor cheaper than an employee?
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.