Cost of employee calculator

What makes up the true cost of an employee

Beyond the salary you agree to, every employer in the U.S. pays four mandatory payroll taxes on each employee's wages. These taxes are separate from — and in addition to — the taxes withheld from the employee's own paycheck.

Social Security (OASDI) — 6.2%

Applied to wages up to the Social Security wage base ($176,100 for 2025). You pay 6.2%; the employee pays a matching 6.2% out of their own wages.

Medicare (HI) — 1.45%

Applied to all wages with no cap. Same 1.45% split: you pay half, the employee pays half. (A 0.9% Additional Medicare Tax kicks in on employee wages above $200k, but that is the employee's liability only — not an employer cost.)

FUTA — 0.6% net on first $7,000

The Federal Unemployment Tax Act rate is 6% on the first $7,000 of wages, but employers in states that pay their state UI taxes on time receive a 5.4% credit, reducing the net federal rate to 0.6% — a maximum of $42 per employee per year. Credit-reduction states (states with outstanding federal loans) have a higher effective rate; check the IRS Schedule A (Form 940) each filing year.

SUTA — varies by state

State Unemployment Tax Act rates and taxable wage bases vary significantly. New employers typically pay a standard rate until they accumulate enough experience to be experience-rated. The calculator pre-fills the 2025 new-employer rate and wage base for the state you select.

Benefits: the second layer of employer cost

The mandatory payroll taxes above are just the floor. Competitive employers also cover some or all of: health insurance premiums (employer share), dental and vision, a 401(k) or SIMPLE IRA match, paid time off (a cost not in the calculator, since it is baked into the salary), workers' compensation insurance, and state-specific mandates such as paid family leave or short-term disability.

A rough rule of thumb from Bureau of Labor Statistics data: benefits add 30–40% on top of base wages for full-time employees at private-sector employers. High-benefit employers (tech, finance, larger companies) can run 50% or more. The calculator's benefits field lets you enter your actual employer cost for these items.

Worked example

A small business in Texas hires a full-time employee at $60,000 per year. Texas uses the standard 2.7% new-employer SUTA rate on the first $9,000 of wages:

The mandatory burden alone is 8.1% of the $60,000 salary. Adding a $7,200 health insurance contribution brings the total to $72,075 — 20% above the base salary.

Assumptions and limitations

• SUTA rates are new-employer rates for 2025. Once you have filed payroll taxes for two or three years, your state assigns an experience rate based on your UI claims history. Experience rates can be much lower or significantly higher than the new-employer rate. Check your state workforce agency's annual rate notice for your current assigned rate.
• SUTA wage bases change annually. The values shown are based on the DOL's Significant Provisions document for January 2025. Several states adjust the wage base each year. Verify the current year's base with your state before filing.
• FUTA assumes a full 5.4% state UI credit. If your state has an outstanding federal UI loan balance, it becomes a credit-reduction state and the net FUTA rate rises. The IRS publishes the list of credit-reduction states each November. The calculator uses the full-credit 0.6% net rate.
• This calculator does not include: workers' compensation insurance premiums (state-regulated, varies by industry classification), state-specific payroll mandates (California SDI, New York DBL/PFL, Washington Cares Fund, etc.), or the employer's share of any fringe benefit plans beyond the optional benefits field. Workers' comp and state mandates can add 2–8% of payroll depending on industry and state.
• The Social Security wage base shown ($176,100) is the 2025 figure. The IRS announces the following year's wage base each October.

Frequently asked questions

Does this apply to 1099 contractors too?

No. If a worker is correctly classified as an independent contractor, you do not pay employer payroll taxes on their compensation. However, misclassification carries significant IRS and DOL penalties. The IRS uses a multi-factor behavioral and financial control test. When in doubt, file Form SS-8 to request a classification determination.

What is the real "burden rate" for budgeting purposes?

Staffing and HR professionals typically use a burden rate of 18–25% for mandatory taxes plus basic benefits. Full-benefit packages (health, dental, 401k match, PTO cash value) can push it to 30–40%. The calculator shows the mandatory floor; add your actual benefits costs for a complete picture.

My state has a paid family leave or disability insurance mandate — is that here?

Not yet. California SDI (0.9% of wages), New York DBL/PFL, Washington Cares Fund, and similar state mandates add to employer payroll costs but vary in structure (some are employee-paid, some employer-paid, many are split). These mandates are not in the current calculator. Check your state workforce agency for the current rate.

How does this change when an employee earns over $176,100?

Social Security taxes stop at the wage base, so your employer SS cost is capped at $10,918.20 per employee per year regardless of how high the salary goes. Medicare has no cap — you pay 1.45% on every dollar. Enter a salary above $176,100 and the calculator applies the cap automatically.