The hidden costs of each hire
When someone says "we pay our account manager $60,000," that is the salary — not the cost. The real cost is salary plus payroll taxes, plus health insurance premiums, plus retirement contributions, plus the overhead of the desk, laptop, software, and utilities they consume. For most US employers, the fully-loaded cost is 1.25×–1.45× the salary. A $60,000 hire typically costs $75,000–$87,000 per year.
Ignoring this number leads to two kinds of mistakes. First, you hire earlier than you can afford because you priced on salary alone. Second, you underprice your services because you think your team costs less than it does. The calculator above walks through each line item and produces the true number.
Payroll taxes: the non-negotiable 7.65%+
Employers owe 6.2% Social Security tax on the first $168,600 of wages (2024 cap) and 1.45% Medicare tax on all wages — total 7.65% baseline. State unemployment tax (SUTA) adds 0.5–6% depending on your state and experience rating. Federal unemployment (FUTA) is effectively 0.6% on the first $7,000 per employee. Workers' comp varies by industry but runs 0.5–3% of payroll for most businesses.
Add it up and payroll-related taxes alone typically add 8–12% on top of salary. The calculator defaults to 7.65% so you do not double-count SUTA and workers' comp if you already have them accounted for elsewhere — edit the field to match your actual rate.
Health insurance: the biggest benefit cost
US employer-sponsored health plans averaged around $8,500 per year for single coverage and $24,000 per year for family coverage in 2024. Employers typically pay 80% of single premiums and 70% of family — so roughly $6,800 and $16,800 respectively. The calculator lets you enter a monthly dollar figure so you can plug in your specific plan cost. If you are not offering health insurance yet, be aware that most professional-class hires expect it and will take 10–15% less in salary to get a solid plan.
Retirement: match or SEP
A typical 401(k) match is 3–6% of salary. At 3% on a $60,000 salary, that is $1,800 per year. If your business is under 50 employees, a SIMPLE IRA or SEP-IRA is cheaper to administer than a full 401(k) and still offers competitive match. Some small businesses skip retirement entirely, which saves money but puts you at a hiring disadvantage for roles where retirement benefits matter.
Paid time off is a real cost
If you give 15 days of PTO plus 10 holidays per year, the employee is paid for 25 days they are not working. That is 10% of working days, or 7.7% of the annual salary after accounting for weekends. Many businesses do not include this in their cost model because the employee is still on payroll — but the capacity you are paying for is lower than you think. For staffing and pricing decisions, it matters.
Overhead: the easy-to-miss bucket
Every hire consumes rent, utilities, insurance, software licenses, equipment, and administrative support. A common rule of thumb is 10–20% of salary for office-based knowledge workers, lower for remote employees with no shared space, higher for roles requiring specialized tools or equipment. Include:
- Laptop, phone, monitor, and peripherals: $2,000–$4,000 amortized over 3 years = $700–$1,300/year.
- Software and SaaS subscriptions: $2,000–$5,000/year per knowledge worker.
- Office space allocation: rent divided by seat count, plus utilities and insurance.
- HR and payroll processing: $30–$80 per employee per month.
- Training and professional development: 1–2% of salary.
Commission, bonus, and equity
Sales roles often have commission structures that add 20–60% on top of base. When modeling sales-role economics, budget at commission targets, not base — a $60,000 base with $60,000 on-target commission costs you $150K+ fully loaded, not $80K. For equity-comp roles (rare in small business but common in startups), the accounting cost is the fair market value of the grant amortized over the vesting period.
Full-time vs contractor math
Contractors (1099) don't trigger payroll tax, benefits, or overhead — you pay an invoice and it is a clean line item. On paper they look cheaper, but they typically charge 40–80% more per hour than a staff equivalent because they bear those costs themselves. The right question is not "which is cheaper per hour?" but "which fits the work?" Contractors are better for well-scoped short-term projects; full-time hires are better for ongoing work with coordination needs.
Also check the labor law rules for contractor classification — many states (California is the strictest) have narrow definitions, and misclassifying a worker as 1099 when they function as an employee creates tax and wage liability. Our freelance rate calculatorshows the contractor's side of this tradeoff.
The true cost of firing and turnover
Turnover costs are often estimated at 50–200% of the departing employee's salary. A $60,000 account manager who leaves after 18 months probably costs you $30,000–$120,000 to replace — recruitment, training ramp, lost productivity, and temporary coverage. The case for spending more on retention (raises, benefits improvements, culture investment) becomes compelling once you price turnover honestly.
When the number gets used
Use the fully-loaded number any time you are pricing services, planning headcount, or weighing a hire against a contractor or tool. Staff time billed at "$30/hour because that's their salary" is underpriced by at least 40%. Tools and automations that cost less than the fully-loaded hourly rate of the person they save almost always pay for themselves, and the calculator helps you compare quickly.