How the cost is calculated
Payroll taxes = 6.2% × min(Salary, $184,500) + 1.45% × Salary + 0.6% × min(Salary, $7,000) + SUTA
Total cost = Salary + Payroll taxes + Benefits + Other costs
Total cost = Salary + Payroll taxes + Benefits + Other costs
Example: A $60,000 salary carries $3,720 of Social Security, $870 of Medicare, $42 of FUTA and $189 of SUTA (2.7% of $7,000). Add $8,000 of health insurance, a 3% 401(k) match ($1,800), 1% workers’ comp ($600) and $1,500 of equipment and software, and the employee costs about $76,721 a year — 1.28× salary, or $36.89 per hour paid.
Other costs to budget
- Recruiting and onboarding (often several thousand dollars per hire).
- Paid time off — already inside the salary, but it reduces productive hours.
- Payroll software, office space and training.
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Frequently asked questions
How much does an employee cost on top of salary?
Typically 20–40% more than salary. Payroll taxes add about 8–9%; health insurance, retirement contributions and other benefits add the rest.
What payroll taxes does an employer pay in 2026?
Social Security 6.2% on wages up to $184,500, Medicare 1.45% on all wages, federal unemployment tax (FUTA) of effectively 0.6% on the first $7,000, and state unemployment tax (SUTA) at a rate and wage base set by each state.
What is the SUTA rate?
Each state assigns rates based on industry and claims history. New employers often pay around 2.7%, on wage bases ranging from $7,000 to more than $70,000 depending on the state.
Is workers’ compensation included?
Enter it in the “workers’ comp and other” percentage. Rates range from under 0.5% for office work to several percent for construction.