An employee costs more than their salary. Add employer payroll taxes, insurance, and benefits to see what a hire really costs your business per year.
SUTA rates and wage bases are set by each state and vary by employer experience rating — check your state's rate notice and enter it here.
Other costs might include equipment, software licences, training, or recruiting fees.
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A useful planning rule is that an employee costs 1.25× to 1.4× their salaryonce mandatory payroll taxes and typical benefits are included. A $60,000 hire commonly costs $75,000–$84,000 a year in practice.
Some of that is legally required — the employer share of Social Security and Medicare, federal unemployment tax (FUTA), state unemployment tax (SUTA), and in almost every state workers' compensation insurance. The rest (health cover, retirement match, equipment) is discretionary but usually necessary to hire competitively.
| Tax | Rate | Applies To |
|---|---|---|
| Social Security | 6.2% | First $184,500 of wages |
| Medicare | 1.45% | All wages (no cap) |
| FUTA | 0.6% effective | First $7,000 of wages |
| SUTA | Varies by state | State wage base |
| Workers' comp | Varies by risk class | Payroll |
FUTA is 6.0% before the standard 5.4% state credit, giving the 0.6% effective rate most employers pay.
How much does an employee cost beyond their salary?
Typically 25–40% on top of base salary. Mandatory employer payroll taxes alone are roughly 8–10%, with health insurance and retirement benefits making up most of the remainder.
What payroll taxes does an employer pay?
Employers pay a matching 6.2% Social Security and 1.45% Medicare on wages, plus FUTA (federal unemployment) and SUTA (state unemployment). Income tax is withheld from the employee, not paid by the employer.
What is the difference between FUTA and SUTA?
FUTA is the federal unemployment tax — 6.0% on the first $7,000 of wages, usually reduced to 0.6% by a state credit. SUTA is the state equivalent; both the rate and wage base are set by your state and depend on your claims history.
Is a contractor cheaper than an employee?
On paper often yes, because you avoid employer payroll taxes and benefits — but contractors charge more to compensate, and misclassifying an employee as a contractor carries serious penalties. Classification is determined by IRS and state tests, not by cost.