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.
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 →How payroll is reconciled in the booksWorked 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.
- 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 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 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 shows how to tie the books to the payroll register each month.
Updated October 29, 2026