1. Scope
Calculates the fully-loaded annual cost of a US employee from itemized inputs: base salary + employer-side payroll taxes + dollar-and-match benefits + itemized overhead. Benefits and overhead are entered as specific line items, not a single blended percentage.
2. Inputs and outputs
Inputs
- base_salary number (currency/year)
- payroll_tax_pct percent default: 7.65
Employer FICA portion.
- unemployment_insurance_rate percent default: 2.0
SUTA/FUTA, a separate line — not folded into payroll tax.
- workers_comp_rate percent default: 1.0
- health_insurance_annual number (currency/year) default: 7000
Dollar amount, not a percent of salary.
- retirement_match_percent percent default: 3
Employer 401(k) match as a percent of salary.
- pto_weeks number default: 3
Reduces the productive-hours denominator only; it is NOT added to cash (salary already pays for PTO).
- equipment_annual number (currency/year) default: 2000
- software_annual number (currency/year) default: 1200
- office_space_annual number (currency/year) default: 5000
- training_annual number (currency/year) default: 1500
- recruiting_cost number (currency) default: 0
One-time, counted in year-one total.
Outputs
- employerTaxes
salary × (payroll_tax_pct + unemployment_insurance_rate + workers_comp_rate).
- benefitsCost
health_insurance_annual + salary × retirement_match_percent.
- overheadCost
equipment + software + office + training (PTO is not a cash line).
- totalAnnualCost
salary + employerTaxes + benefitsCost + overheadCost + recruiting_cost.
- costMultiplier
totalAnnualCost / salary.
- effectiveHourlyRate
totalAnnualCost / ((52 − pto_weeks) × 40 productive hours).
- monthlyBurn
totalAnnualCost / 12.
Engine source: src/lib/employee-cost-calculator/engine.ts
3. Formula / scoring logic
employer_taxes = salary * (payroll_tax_pct + unemployment_insurance_rate + workers_comp_rate) / 100
benefits = health_insurance_annual + salary * retirement_match_percent / 100
overhead = equipment + software + office + training
total_cost = salary + employer_taxes + benefits + overhead + recruiting_cost
multiplier = total_cost / salary
effective_hourly = total_cost / ((52 - pto_weeks) * 40)4. Assumptions
- FICA employer portion defaults to 7.65% and is applied as a flat rate with no wage-base cap.
- Benefits are computed from a dollar health-insurance figure plus a retirement-match percent — there is no single benefits-percent input.
- PTO does not add cash (the salary already pays for those weeks); it only lowers the productive-hours denominator behind the effective hourly rate.
- State unemployment (SUTA) and workers' comp are their own rate inputs, separate from the FICA line.
5. Data sources
6. Known limitations
- US-only defaults. For European employers, substitute Eurostat labour-cost figures (see Eurostat LCI).
- Does not model equity compensation, bonuses, or severance accruals.
- Contractor (1099) comparisons belong in the Contractor vs Employee Calculator.
7. Reproducibility
Input
base_salary = $65,000, all other inputs at defaults (7.65% / 2% / 1% rates, $7,000 health, 3% match, 3 PTO weeks, $2,000 + $1,200 + $5,000 + $1,500 overhead, $0 recruiting).
Expected output
employerTaxes = $6,922.50, benefitsCost = $8,950, overheadCost = $9,700, totalAnnualCost = $90,572.50, costMultiplier = 1.39×, effectiveHourlyRate = $46.21, monthlyBurn = $7,547.71.
8. Change log
- 2026-04-24 methodology page first published.
Worked example
Run live against the same engine this site ships
(/engines/employee-cost-calculator.js).
The inputs and outputs below are recomputed on every build and
independently re-verified in CI — they are never hand-authored.
Input
- tool
- employee_cost_calculator
- base_salary
- 65000
- payroll_tax_pct
- 7.65
- retirement_match_percent
- 3
- health_insurance_annual
- 7000
- pto_weeks
- 3
- equipment_annual
- 2000
- software_annual
- 1200
- office_space_annual
- 5000
- training_annual
- 1500
- unemployment_insurance_rate
- 2
- workers_comp_rate
- 1
- recruiting_cost
- 0
Output
- baseSalary
- 65000
- employerTaxes
- 6922.5
- benefitsCost
- 8950
- overheadCost
- 9700
- totalAnnualCost
- 90572.5
- costMultiplier
- 1.39
- effectiveHourlyRate
- 46.21
- monthlyBurn
- 7547.71
- breakdown[0].label
- Base Salary
- breakdown[0].amount
- 65000
- breakdown[0].category
- Salary
- breakdown[1].label
- Employer Taxes & Contributions
- breakdown[1].amount
- 6922.5
- breakdown[1].category
- Taxes
- breakdown[2].label
- Health Insurance
- breakdown[2].amount
- 7000
- breakdown[2].category
- Benefits
- breakdown[3].label
- Retirement Match
- breakdown[3].amount
- 1950
- breakdown[3].category
- Benefits
- breakdown[4].label
- Equipment
- breakdown[4].amount
- 2000
- breakdown[4].category
- Overhead
- breakdown[5].label
- Software
- breakdown[5].amount
- 1200
- breakdown[5].category
- Overhead
- breakdown[6].label
- Office Space
- breakdown[6].amount
- 5000
- breakdown[6].category
- Overhead
- breakdown[7].label
- Training & Development
- breakdown[7].amount
- 1500
- breakdown[7].category
- Overhead
Frequently asked questions
- What does the Employee Cost Calculator calculate?
- Calculates the fully-loaded annual cost of a US employee from itemized inputs: base salary + employer-side payroll taxes + dollar-and-match benefits + itemized overhead. Benefits and overhead are entered as specific line items, not a single blended percentage.
- What inputs does the Employee Cost Calculator need?
- It takes 12 inputs: base_salary, payroll_tax_pct (default 7.65), unemployment_insurance_rate (default 2.0), workers_comp_rate (default 1.0), health_insurance_annual (default 7000), retirement_match_percent (default 3), pto_weeks (default 3), equipment_annual (default 2000), software_annual (default 1200), office_space_annual (default 5000), training_annual (default 1500), recruiting_cost (default 0). Outputs returned: employerTaxes, benefitsCost, overheadCost, totalAnnualCost, costMultiplier, effectiveHourlyRate, monthlyBurn.
- What formula does the Employee Cost Calculator use?
- The exact computation is: employer_taxes = salary * (payroll_tax_pct + unemployment_insurance_rate + workers_comp_rate) / 100; benefits = health_insurance_annual + salary * retirement_match_percent / 100; overhead = equipment + software + office + training; total_cost = salary + employer_taxes + benefits + overhead + recruiting_cost; multiplier = total_cost / salary; effective_hourly = total_cost / ((52 - pto_weeks) * 40)
- Can I verify the Employee Cost Calculator with a worked example?
- Yes. With base_salary = $65,000, all other inputs at defaults (7.65% / 2% / 1% rates, $7,000 health, 3% match, 3 PTO weeks, $2,000 + $1,200 + $5,000 + $1,500 overhead, $0 recruiting). the tool returns employerTaxes = $6,922.50, benefitsCost = $8,950, overheadCost = $9,700, totalAnnualCost = $90,572.50, costMultiplier = 1.39×, effectiveHourlyRate = $46.21, monthlyBurn = $7,547.71.
- Where does the Employee Cost Calculator get its benchmark data?
- Reference data is sourced from: US BLS Employer Costs for Employee Compensation (ECEC) (as of 2024); US SSA Social Security wage base and tax rates (as of 2026).
- What can the Employee Cost Calculator not tell me?
- Known limitations: US-only defaults. For European employers, substitute Eurostat labour-cost figures (see Eurostat LCI). Does not model equity compensation, bonuses, or severance accruals. Contractor (1099) comparisons belong in the Contractor vs Employee Calculator.