Employee Details
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$
%
$
$
True Employment Cost
Total Annual Employee Cost
—
Base Salary—
Employer FICA (7.65%)—
FUTA / SUTA Unemployment (~2%)—
Health Insurance—
401(k) Match—
PTO Cost—
Overhead & Equipment—
Cost Multiplier vs Salary—
Hourly Cost (2,080 hrs/yr)—
The True Cost of an Employee
When you hire someone at a $65,000 salary, your actual cost as an employer is typically $85,000–$95,000 or more. The "loaded" cost — including payroll taxes, benefits, equipment, and overhead — is usually 1.25–1.4× the base salary. Understanding this is essential for pricing services, writing business plans, and evaluating the economics of hiring vs contracting.
Mandatory Employer Costs
- Employer FICA: 6.2% Social Security + 1.45% Medicare = 7.65% of wages
- Federal Unemployment (FUTA): 6% on first $7,000 of wages (most employers pay 0.6% after SUTA credit)
- State Unemployment (SUTA): Varies by state and employer experience rating, typically 1–5%
- Workers' Compensation Insurance: Varies widely by industry and state
Benefits That Drive Real Cost
Health insurance is typically the largest benefit cost — employers contribute $7,000–$15,000+ annually per employee for family coverage. A 401(k) match of 3–6% adds thousands more. PTO costs the employer the daily salary rate for each day off without productive output.
Frequently Asked Questions
Should I hire an employee or use contractors? ▼
Contractors have no benefits cost, no payroll taxes, and no overhead — but typically charge 50–100% more per hour than what you'd pay an employee. For short-term or specialized work, contractors are often cheaper. For ongoing, core work, full-time employees usually cost less per hour of productive output and offer more control. The break-even depends on hours needed, skills required, and turnover costs.
What is the cost of employee turnover? ▼
Employee turnover is extremely expensive — SHRM estimates replacement costs at 50–200% of annual salary depending on the role. Costs include recruiting fees (job boards, agencies), interviewing time, onboarding, training, reduced productivity during the learning curve, and institutional knowledge lost. This is why retention, culture, and competitive compensation dramatically affect a company's bottom line.