How to Calculate the True Cost of an Employee
The fully burdened cost of an employee goes far beyond their base salary. For every $60,000 you pay in salary, you might actually spend $75,000 to $90,000 when you factor in payroll taxes, benefits, and overhead. This calculator helps you understand the complete picture using 2025 federal tax rates.
Understanding the Components
1. Base Compensation
Salary + bonuses + commission. This is the "visible" cost, but it's typically only 65-75% of the true cost.
2. Payroll Taxes
SS (6.2%), Medicare (1.45%), FUTA, SUI, Workers Comp. Adds 8-10% on top of salary.
3. Benefits
Health insurance, 401k match, PTO value, disability, life insurance. Adds 15-30% on top of salary.
4. Overhead
Equipment, software, office space, training. Adds 5-15% on top of salary.
2025 Federal Payroll Tax Rates
Example: For a $60,000 salary, employer payroll taxes add ~$5,500-$6,500/year.
The Revenue Requirement Formula
How much must this employee generate to pay for themselves?
Burden Multiplier Benchmarks
Minimal benefits, no office, BYOD
Competitive benefits, hybrid office
Premium benefits, expensive office
Practical Applications
Budget accurately before making offers
Use monthly burn for startup runway
Hourly rate helps set billing minimums
Compare overhead savings of remote work