Free calculator
Cost of an Employee Calculator
An employee paid $20 an hour costs you more than $20 an hour. Enter the wage, the hours and your state's unemployment rate to see the true hourly cost and the yearly total after employer taxes and insurance. Free, no sign-up.
- Wages a year$0
- Social Security and Medicare match, 7.65%$0
- FUTA (federal unemployment)$0
- State unemployment$0
- Workers' comp$0
- Taxes and insurance on top of wages$0
- Payroll software and benefit$0
- Total cost a year$0
- Hours a year0
How it works
You match the employee's Social Security and Medicare: 6.2% of wages up to the $184,500 Social Security wage base for 2026 ($192,300 for 2027), and 1.45% of all wages with no cap. Together that is 7.65% for most employees.
FUTA, the federal unemployment tax, is 6.0% of the first $7,000 each employee earns in a year, less a credit of up to 5.4% for paying state unemployment on time, so most employers pay 0.6%, or $42 per employee a year. A few states that owe the federal government get a smaller credit; your payroll provider knows if yours is one. State unemployment works the same way at your state's rate on your state's wage base. Both stop once an employee's pay for the year passes the wage base, so the first months of the year usually cost the most.
Workers' comp is quoted per $100 of wages and depends on the work. The calculator adds the year's taxes and insurance, divides by the hours worked, and adds that to the wage. Payroll software and any benefit allowance are spread over the same hours for the all-in figure. Overtime, paid time off and benefits the employee pays for are not included.
A worked example
The First-Time Employer Payroll and Benefits Setup Guide works through a fictional 3-person cleaning business hiring at $20 an hour for 30 hours a week, 1,560 hours a year. Her first $600 week adds $37.20 of Social Security match, $8.70 of Medicare, $3.60 of FUTA, $17.10 of state unemployment (the guide's Ohio example, 2.85% on the first $9,000) and $24.00 of workers' comp at about $4 per $100. Over the year that is $3,933.30 on top of $31,200 of wages, so the true hourly cost is $22.52, about 12.6% over the wage. With $268 a year of payroll software and a $300 a month benefit allowance it is $25.00 an hour. Type 300 in the benefit box to see it.
Hire your first employee in the right order
The First-Time Employer Payroll and Benefits Setup Guide walks the 30-day sequence: EIN, state accounts, workers' comp, a payroll provider, new-hire paperwork and the first payroll run. It has the W-2 or 1099 checklist, a payroll provider comparison, the pay stub line by line, this true hourly cost worksheet and a filing calendar. $2.99, instant download.
Questions
How much does an employee cost on top of their wage?
In this page's example, taxes and insurance add 12.6% to a $20 wage: 7.65% for Social Security and Medicare, FUTA and state unemployment on the first part of their pay, and workers' comp. Your figure depends on your state and the work. Physical work costs more because workers' comp costs more. Benefits and software come on top.
What is the employer's share of payroll taxes in 2026?
6.2% Social Security on wages up to $184,500 and 1.45% Medicare on all wages, matching what you withhold from the employee. FUTA is 0.6% of the first $7,000 in most states. State unemployment depends on your state.
Why is the first quarter more expensive?
FUTA and state unemployment only apply to the first part of each employee's pay in a year: $7,000 for FUTA and your state's wage base for state unemployment. Once an employee passes those amounts, those taxes stop until January.
Where do I find my state unemployment rate?
Your state's unemployment agency sends a rate notice when you register as an employer. New employers get a set rate for the first few years. The wage base is on the same agency's site.
Is the amount I withhold from the employee a cost to me?
No. Withheld income tax and the employee's own 7.65% are the employee's money that you hold and must deposit on time. This calculator counts only what you pay on top of the wage.
Is this tax advice?
No. It is a planning estimate based on the numbers you type. Your state and local rules, your workers' comp quote and your payroll provider's figures decide the real cost.