What the Employee Cost Calculator does
This calculator estimates what an employee really costs an employer in a year and per hour: gross salary plus the employer's payroll contributions, pension, benefits, equipment, software, workspace, training and a share of the cost of recruiting them. It then divides that loaded cost by paid hours, by hours actually worked after leave and holidays, and by productive hours, so you can price work, budget a hire or compare hiring with contracting.
Contribution rates are entered by you, line by line, as a rate on salary above a threshold and up to a cap. Two dated starting points are included - US federal employer taxes for 2026 and UK employer National Insurance for 2026 to 2027 - copied from the official pages on the date shown. Nothing else is assumed.
How to use it
- Enter the gross yearly salary and choose a contribution preset, or type your own lines as 'name, rate %, threshold, cap'.
- Add employer pension or retirement contributions as a percentage of salary, plus benefits the employer pays for.
- Add yearly overheads: equipment spread over its life, software seats, the workspace cost per desk, training, and any other per-person costs.
- Enter the one-off recruiting cost and how long you expect the person to stay; the calculator spreads it over that tenure.
- Enter contracted hours, paid leave, public holidays and the share of worked hours you consider productive, then read the cost per hour at each level.
Reading the results
The multiplier is loaded cost divided by salary. It is often quoted as a rule of thumb, but it varies widely with benefits, office costs and the country's payroll taxes - this figure is yours, not a benchmark.
Cost per paid hour spreads the whole cost over every contracted hour. Cost per worked hour removes paid leave and holidays. Cost per productive hour also removes the share of time you consider non-billable or internal - that is the figure to compare with a contractor's hourly rate.
Contribution lines show each payroll tax separately, so a threshold or wage cap is visible rather than buried in a total.
Worked example: a US hire on 60,000
With the 2026 federal preset, the employer pays Social Security at 6.2% (3,720), Medicare at 1.45% (870) and FUTA at 0.6% of the first 7,000 (42): 4,632. A 3% retirement contribution adds 1,800.
Benefits of 7,000, a laptop at 1,000 a year, 1,200 of software, 3,000 for a desk, 500 of training and a 6,000 recruiting fee spread over three years (2,000 a year) bring the total to 81,132 - 1.35 times the salary.
The year has 2,080 paid hours. Removing 15 days of leave and 10 public holidays at 8 hours leaves 1,880 worked hours; at 80% productive time that is 1,504 hours, so each productive hour costs 81,132 / 1,504 = 53.94. State unemployment tax and workers' compensation are not included and would add to it.
Formulas and scoring rules
- Contribution line
max(0, min(salary, cap) - threshold) x rateA cap of 0 means no cap.- Recruiting per year
recruiting cost / expected tenure in years- Loaded cost
salary + contributions + pension + benefits + equipment + software + workspace + training + recruiting per year + other- Hours
paid = 52 x hours per week; worked = paid - (leave + holidays) x hours per day; productive = worked x productive share- Cost per hour
loaded cost / paid, worked or productive hoursShown to two decimals; totals to whole units. Contributions are computed on the yearly salary, not per pay period.
About the presets
The US preset holds the employer's share of Social Security (6.2% up to the 2026 wage base of 184,500), Medicare (1.45%, no cap) and federal unemployment tax at 0.6% on the first 7,000 of wages, which assumes the full 5.4% state credit, from IRS Publication 15 for 2026. State unemployment tax, local taxes and the additional Medicare tax withheld from employees are not included.
The UK preset holds employer Class 1 National Insurance at 15% above the secondary threshold of 5,000 a year for 2026 to 2027, from GOV.UK. It does not apply the Employment Allowance, lower rates for young employees or apprentices, or the Apprenticeship Levy, because those depend on the employer.
Limitations: what the result does not prove
- Payroll taxes are calculated on the yearly salary. Real payroll runs per pay period, and thresholds can apply per period, so small differences are normal.
- It is not payroll or tax advice. Rates change and exceptions apply; check the official source for your jurisdiction and year.
- Overheads are averages you enter. Shared costs such as management time or office rent can be allocated in many defensible ways.
- Productive share is a judgement. It is useful for pricing but should not be read as a measure of anyone's performance.
Privacy: where your data goes
Everything you paste, type or drop is processed in this browser tab. It is not uploaded, logged, stored or sent to analytics. Session recording and tag-manager scripts are switched off on this page.
Standards and sources
- IRS Publication 15 (2026), Employer's Tax Guide
- GOV.UK - Rates and thresholds for employers 2026 to 2027
Frequently asked questions
How much does an employee cost on top of salary?
It depends on the country, benefits and overheads. Payroll taxes alone might add a few percent to around fifteen percent, and benefits, equipment, space and recruiting add more. Enter your own figures; the multiplier the calculator shows is the answer for your case.
What is a fully loaded labour cost?
It is salary plus everything the employer pays because the person is employed: payroll contributions, pension, benefits, equipment, software, workspace, training and recruiting. Dividing it by productive hours gives a fully loaded hourly cost for pricing work or comparing with contractors.
How is employer National Insurance calculated for a yearly salary?
For 2026 to 2027 the employer pays 15% on earnings above the secondary threshold of 5,000 a year. On a 40,000 salary that is 15% of 35,000, or 5,250, before any Employment Allowance the business may be able to claim.
Why does the Social Security line stop growing at high salaries?
Social Security tax only applies up to the yearly wage base, 184,500 for 2026. Above that the employer pays no more Social Security, although Medicare continues without a cap. Enter the cap in the contribution line to model any capped tax.
Should recruiting costs be included in the cost of an employee?
Yes, if you want the true cost of the role. A one-off agency fee or advertising cost is spread over how long you expect the person to stay, so a short expected tenure makes each year more expensive.
How do I compare the cost of an employee with a freelancer?
Use the cost per productive hour here and compare it with the freelancer's hourly rate for the hours you would actually buy. The freelancer carries their own leave, equipment and idle time, so their rate should be higher than an employee's hourly pay.
Last reviewed by the A2Z.Tools team against the sources listed above.
