Free business planning calculator
Employee Cost Calculator — True Cost of Hiring
Calculate the true cost of hiring an employee including salary, payroll taxes, benefits, and overhead. Free employee cost calculator for small business hiring decisions.
Enter the minimum numbers needed to get a result.
Updated live as you type.
Planning estimate only. It does not include taxes, overhead allocation, depreciation, discounts, or other business-specific adjustments.
Employee cost is the total financial burden of hiring an employee, including base salary plus payroll taxes, benefits, and overhead costs that employers pay beyond the salary.
Formula and example
Total Cost = Salary + (Salary × Tax Rate) + (Salary × Benefits%) + (Salary × Overhead%); Burden = (Total Cost - Salary) / Salary × 100
For a $55,000 salary with 7.65% taxes, 30% benefits, and 15% overhead, total cost is approximately $83,958 — a 52.7% burden above base salary.
Methodology & assumptions
Last updated: 2026-06-13Calculation method
Calculates the employer's true cost by adding payroll taxes (employer portion of FICA/Medicare), benefits (health insurance, retirement matching, PTO), and overhead (equipment, training, office) to base salary. Industry estimates: benefits typically 25-35%, overhead 10-20%.
Data sources
Uses the numbers you enter and standard small-business finance formulas. Benchmark comparisons use HustleFin industry benchmark pages where available.
Limitations
Estimates only. Actual costs vary by location, benefits package, and role. Does not include recruitment costs, onboarding, severance, or workers' compensation insurance.
Input definitions
- Annual base salary: Gross annual salary before deductions.
- Payroll tax rate: Employer portion of FICA/Social Security/Medicare.
- Benefits as % of salary: Health insurance, retirement, paid time off, etc.
- Overhead as % of salary: Equipment, software, training, office space.
Frequently asked questions
How much does an employee really cost?+
Industry estimates suggest the true cost of an employee is 1.25 to 1.4 times base salary. Our calculator uses the standard inputs of taxes, benefits, and overhead to give you a personalized estimate.
What payroll taxes do employers pay?+
In the US, employers pay 6.2% for Social Security, 1.45% for Medicare (total 7.65% FICA), plus federal and state unemployment taxes (FUTA/SUTA). Our calculator uses the 7.65% FICA rate as default.
What benefits should I include?+
Common benefits include health insurance (typically $500-1,500/month per employee), retirement plan matching (3-6% of salary), paid time off, disability insurance, and life insurance.
How does this affect my pricing?+
For service businesses, employee burden directly impacts your billable rate. If an employee costs $83K annually and bills 1,500 hours, you need to charge at least $55/hour just to cover their cost.
Related guides
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