What does an employee really cost?
An employee's pay is only part of the bill. On top of wages, an employer in the United States pays payroll taxes, buys insurance, and often covers benefits and equipment. As a rough guide, the total can run well above the wage, so it helps to price a hire before you make the offer. This calculator adds up the main costs for one employee for 2026 and shows them per year, per month and per hour worked, with a cost multiplier: total cost divided by wages.
Payroll taxes the employer pays
- Social Security: 6.2% of each employee's wages, up to the 2026 wage base of $184,500. Above that, no more Social Security tax is due on that employee, which is a maximum of $11,439 for the year.
- Medicare: 1.45% of all wages, with no cap.
- Additional Medicare Tax of 0.9% on pay above $200,000 is paid by the employee only. The IRS says there is no employer match, so it does not add to your cost.
The employee pays the same rates from their own pay, which is withheld and is not an extra cost to you. To see the employee's side, use the paycheck calculator.
Unemployment taxes: FUTA and SUTA
FUTA, the federal unemployment tax, is 6.0% on the first $7,000 of each employee's wages for the year. Employers who pay their state unemployment tax on time get a credit of up to 5.4%, so the usual net rate is 0.6%, or at most $42 per employee. If a state has borrowed from the federal government and has not paid the loan back, employers in that state lose part of the credit and pay more. This is a credit reduction. California had a 1.2% reduction for 2025, and the Department of Labor's early list for 2026 shows California again, with the final list not out until after November 10, 2026. The calculator has a box where you can enter a reduction.
SUTA, the state unemployment tax, is set by each state. States use different wage bases, from $7,000 in a few states to more than $70,000 in Washington. A new employer usually pays a standard starting rate, typically in the range of about 1% to 3.4%, and some states set it by industry. Choosing a state fills in the new-employer rate and wage base from the Department of Labor's July 2026 table. These are only starting points: higher rates may apply by industry, such as construction. Check the rate notice your state sends you, and type your own numbers into the boxes.
Benefits and other costs
The optional boxes cover the costs that are not taxes: the health insurance you pay for each month, a retirement match as a percent of pay, workers' compensation insurance as a percent of pay, and other yearly costs such as equipment, software, training or a payroll service. Workers' compensation rates vary by job type and state, so ask your insurance carrier for a quote.
What the calculator leaves out
Some states and cities add their own employer payroll taxes, such as disability, family leave or training taxes. Overtime, bonuses, tip credits, employees who work in more than one state, and the time you spend on payroll and recruiting are not modeled. Treat the result as a planning estimate, not as a payroll or tax calculation.
Is this person an employee at all?
Employer taxes apply only to employees. Whether someone is an employee or an independent contractor depends on the facts under tests used by the IRS, the Department of Labor and your state, not on the label you choose. See the 1099 vs W-2 calculator for a comparison of the money and a checklist of what the agencies look at.
Frequently asked questions
How much more than wages does an employee cost?
For a typical full-time employee earning well under the Social Security wage base, the employer's Social Security and Medicare alone add 7.65% of wages, and unemployment taxes and insurance add more. Health insurance and other benefits can add much more. The calculator shows the exact total for the numbers you enter, along with the multiplier.
Do I pay Social Security tax on all of an employee's wages?
No. In 2026, employer Social Security tax applies only to the first $184,500 of each employee's wages. Medicare tax applies to all wages, and there is no employer match for the 0.9% Additional Medicare Tax.
Where do I find my state unemployment tax rate?
Your state workforce or unemployment insurance agency sends a rate notice each year, and new employers receive a starting rate when they register. The Department of Labor publishes a table of state wage bases and new-employer rates, and each state's own website has the latest figures. The default in the calculator is the new-employer base rate, so use your notice when you have it.