True Cost of an Employee Calculator
Example: Base salary: 70000 $ · Annual benefits cost (health, retirement): 12000 $ · Employer payroll tax rate: 9 % · Annual overhead (equipment, software, space): 6000 $
| True annual cost | $94,300 |
| Employer payroll taxes | $6,300 |
| Cost multiplier (x salary) | 1.35 |
| Monthly cost | $7,858 |
Worked example
A $70,000 salary looks like the cost of the hire, but it is not. Add $12,000 of benefits, 9% employer payroll taxes ($6,300), and $6,000 of overhead, and the true annual cost is about $94,300, roughly 1.35 times the salary and near $7,858 a month. That multiplier is why revenue-per-employee targets, not salary alone, should drive hiring decisions.
Frequently asked questions
What goes into the employer payroll tax rate?
It includes the employer share of Social Security and Medicare (7.65%) plus federal and state unemployment taxes, which vary by state and history. Around 8 to 10% is a common combined estimate.
Why is the cost multiplier useful?
It converts salary into fully loaded cost with one number. If your multiplier is 1.35, you can quickly gauge any role by multiplying its salary, which is handy for budgeting and pricing client work that depends on staff time.
What overhead should I include?
Anything the role requires to function: a laptop and equipment, software seats, office space or a remote stipend, training, and recruiting amortized over the expected tenure. These are easy to forget and add up.
How do I know if a hire pays off?
Compare the true annual cost to the revenue or savings the role is expected to generate. A hire that costs $94,000 fully loaded should reliably produce well more than that in value to be worth it.