---
title: "Cost of an Employee Calculator (2026) | Ledgerbrook"
source: https://ledgerbrook.com/tools/cost-of-an-employee-calculator/
description: "Work out what an employee really costs in 2026: salary or hourly wage plus employer payroll taxes, unemployment tax, workers' comp and benefits."
---

Free calculator

# Cost of an Employee Calculator

## How much does an employee really cost?

Salary, plus 7.65% employer Social Security and Medicare, federal and state unemployment tax, workers' compensation and benefits. A **$50,000** employee with a $500 monthly health premium and a 3% retirement match costs about **$61,556** a year in 2026, 1.23 times salary, or $31.41 per hour worked after 15 paid days off.

1\. Payper yearper hour

Gross pay before the employee's withholding.

2\. Hours per week

Paid days off a year

3\. State unemployment tax

Your state sends the rate each year; new employers get a set starting rate. The defaults are an example.

Rate, %

Wage base

4\. Benefits and other costs

Employer health premium, per month

Retirement match, % of pay

Workers' comp, per 100 of payroll

Other yearly costs

Workers' comp is quoted per $100 of payroll and varies by job class: office work is cents, roofing is dollars. Other costs: equipment, software seats, training, payroll service fees.

Total yearly cost

$61,556

1.23× pay, $31.41 per hour worked

Gross pay

$50,000

Social Security, 6.2%

$3,100

Medicare, 1.45%

$725

Federal unemployment (FUTA)

$42

State unemployment

$189

Workers' compensation

$0

Health insurance

$6,000

Retirement match

$1,500

Other costs

$0

Employer payroll taxes, total

$4,056

Per month

$5,130

Once payroll runs, wages, employer taxes and benefits each need their own account, reconciled to the payroll register every month. Ledgerbrook does that in QuickBooks Online for $149 a month.

[Send your file for a free review →](/contact/?service=monthly)[How payroll is reconciled in the books](/blog/payroll-reconciliation/)

Ledgerbrook

The books behind these numbers, kept for you.

US small business bookkeeping in QuickBooks Online. Fixed prices, agreed before any work starts.

[Get a free file review](/contact/?from=tools%2Fcost-of-an-employee-calculator)

Bookkeeping or CPA firm? [We work under your name](/for-bookkeeping-firms/).

- [Behind on the booksCleanup and catch-up$99per month of backlog20% off 6+ monthsSee what's included](/quickbooks-cleanup/)
- [Every monthMonthly bookkeeping$149a month and upReconciled and closed every monthSee what's included](/monthly-bookkeeping/)
- [At year endCPA handoff pack$199a client, one-timeA file your CPA can file fromSee what's included](/for-cpas/)

Worked examples

## Employer payroll tax by salary, 2026

Payroll taxes only, with state unemployment at 2.7% on the first $7,000. Benefits and workers' compensation come on top. The first row is $15 an hour full time.

| Salary | Social Security and Medicare | Unemployment taxes | Total cost | Over salary |
| --- | --- | --- | --- | --- |
| $31,200 | $2,387 | $231 | $33,818 | 8.39% |
| $40,000 | $3,060 | $231 | $43,291 | 8.23% |
| $50,000 | $3,825 | $231 | $54,056 | 8.11% |
| $75,000 | $5,738 | $231 | $80,969 | 7.96% |
| $100,000 | $7,650 | $231 | $107,881 | 7.88% |
| $200,000 | $14,339 | $231 | $214,570 | 7.29% |

Method

## How the calculator works

- **Social Security and Medicare:** the employer's 6.2% on wages up to $184,500 and 1.45% on all wages, per [IRS Publication 15](https://www.irs.gov/publications/p15).
- **Federal unemployment:** 6.0% on the first $7,000 of each employee's wages, less the 5.4% credit for paying state unemployment tax, leaving 0.6%. Employers in a credit reduction state pay more, on Schedule A of Form 940.
- **State unemployment:** your rate times wages up to your state's wage base. A few states also charge employer taxes for disability, training or paid leave; add them to the rate.
- Hourly pay is multiplied by hours per week and 52 weeks. Cost per hour worked divides the total by those hours less paid days off.
- Left out: overtime, bonuses, local payroll taxes and the cost of hiring. The figures are estimates, not tax advice.

Frequently asked

## Employee cost questions

Paying yourself through an S corp instead? The [S corp tax calculator](/tools/s-corp-tax-calculator/) compares owner payroll with self-employment tax.

### How much does an employee cost on top of salary?

Payroll taxes alone add about 8.11% to a $50,000 salary: 7.65% Social Security and Medicare, plus federal and state unemployment tax on wages up to a yearly base: $7,000 federally, and from $7,000 to over $70,000 by state. Benefits are what move the total. With a $500 monthly health premium and a 3% retirement match, the same $50,000 employee costs $61,556 a year, 1.23 times salary.

### What payroll taxes does an employer pay?

Federally, 6.2% Social Security on wages up to $184,500, 1.45% Medicare on all wages, and federal unemployment tax (FUTA) of 0.6% on the first $7,000 once the state credit applies. On top of that is state unemployment tax at the rate your state assigns, and in a few states other employer taxes. The 0.9% Additional Medicare Tax is the employee's alone; there is no employer match.

### How much does a $20 an hour employee cost?

Full time at 2,080 hours, $20 an hour is $41,600 of wages. Employer payroll taxes, at a 2.7% state unemployment rate on $7,000, bring it to $45,013, or $21.64 per paid hour, before benefits or workers' compensation. Paid holidays and vacation raise the cost per hour actually worked.

### Is a contractor cheaper than an employee?

On taxes, yes: a 1099 contractor pays both halves of Social Security and Medicare as self-employment tax, and there is no unemployment tax or benefit cost. But the label depends on control over the work, not on what the business prefers, and misclassification brings back the payroll tax with penalties. [When to send a 1099](/blog/when-to-send-a-1099/) covers the contractor side.

### Where does employer payroll tax go in the books?

In its own expense account, usually Employer Payroll Taxes, separate from Wages and Salaries, with each tax owed in a liability account until it is deposited. [Payroll reconciliation](/blog/payroll-reconciliation/) shows how to tie the books to the payroll register each month.

Updated October 29, 2026