Employee Cost Calculator
Work out what an employee actually costs you once employer payroll taxes, benefits, equipment and overhead are added to the salary. Then copy the exact Excel and Google Sheets formulas so you can run the same numbers across your whole roster.
How much does an employee really cost?
An employee costs roughly 1.25 to 1.4 times their base salary once employer payroll taxes, benefits, equipment and overhead are included. A $60,000 salary typically lands near $85,000 a year all in. The formula is total cost = base salary + employer payroll taxes + benefits + equipment + overhead, and the labor burden is everything above the salary line.
Employee cost calculator
What this employee costs
Federal rates for tax year 2026 are applied automatically. General information only, not tax or legal advice.
Get the free employee cost spreadsheet
A working Excel and Google Sheets version of this calculator, built for a whole roster rather than one person. Wage-base caps on Social Security, FUTA and state unemployment are already handled, and the summary tab gives you blended burden across the team. Enter your email and we will send it over.
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What is the formula for the true cost of an employee?
Every employee cost model is the same four steps. The step people skip is the last one, and skipping it is what makes a quoted hourly rate lose money.
Step 1: start with base wages
Use the annual salary, or the hourly rate multiplied by paid hours per year. A standard full-time year is 2,080 paid hours, which is 40 hours across 52 weeks. Everything downstream is a percentage of this number or a flat annual figure added to it.
Base wages = hourly rate x paid hours per yearStep 2: add employer payroll taxes
These are the taxes the employer pays on top of the wage, separate from anything withheld from the employee. Three of the five stop at a wage base, which is why a high earner has a lower burden percentage than a low earner.
Employer taxes = Social Security + Medicare + FUTA + state unemployment + workers compStep 3: add benefits, equipment and overhead
Health insurance, the retirement match, laptops and software licences, and the share of rent, utilities and admin time that this person consumes. Overhead allocation is the softest number in the model, and it is usually the largest one after health insurance.
Step 4: divide by the right number of hours
Total annual cost divided by 2,080 paid hours gives the fully burdened hourly rate. But nobody works 2,080 hours. Subtract PTO, holidays and training, and divide by what is left to get the cost per productive hour. That second number is the one to quote against.
Fully burdened hourly rate = total annual cost / paid hours
Cost per productive hour = total annual cost / (paid hours - PTO and holiday hours)Worked example: a $60,000 salary in 2026
A salaried employee on $60,000, 2,080 paid hours, 160 hours of PTO and holidays, a 2.7% state unemployment rate on a $9,000 wage base, 1.2% workers comp and a 3% retirement match.
| Line | Working | Amount |
|---|---|---|
| Base salary | Given | $60,000.00 |
| Social Security | 6.2% of $60,000, under the $184,500 cap | $3,720.00 |
| Medicare | 1.45% of $60,000, no cap applies | $870.00 |
| FUTA | 0.6% of the first $7,000 only | $42.00 |
| State unemployment | 2.7% of the first $9,000 only | $243.00 |
| Workers compensation | 1.2% of $60,000 | $720.00 |
| Retirement match | 3% of $60,000 | $1,800.00 |
| Health insurance | Employer share | $8,400.00 |
| Other benefits | Life, dental, phone allowance | $1,200.00 |
| Equipment and software | Laptop amortised plus licences | $2,400.00 |
| Overhead allocation | Rent, utilities, admin | $6,000.00 |
| Total annual cost | Salary plus everything above | $85,395.00 |
| Labor burden | $85,395 minus $60,000 | $25,395.00 |
| Labor burden rate | $25,395 / $60,000 | 42.3% |
| Fully burdened hourly rate | $85,395 / 2,080 | $41.06 |
| Cost per productive hour | $85,395 / 1,920 | $44.48 |
The gap between $41.06 and $44.48 is the whole point. Quote a client at the fully burdened rate and you have priced 160 hours of paid time off at zero, which on this one employee is $6,569 of unrecovered cost a year.
Employer payroll tax reference for 2026
Only the employer side is shown here. The employee pays a matching 6.2% and 1.45% out of their own gross, but that is their money, not an additional cost to you.
| Tax | Employer rate | Wage base | What that means in practice |
|---|---|---|---|
| Social Security | 6.2% | First $184,500 of wages in 2026 | Caps out at $11,439 per employee per year |
| Medicare | 1.45% | No wage base | Keeps accruing on every dollar of salary |
| Additional Medicare | 0.9% | Above $200,000 | Employee only, the employer does not match it |
| FUTA | 6.0% less a 5.4% state credit, so 0.6% | First $7,000 of wages | Effectively $42 per employee, more in a credit reduction state |
| State unemployment | Varies by state and by your claims history | Varies widely by state | The single most variable line in the model, so use your own rate notice |
| Workers compensation | Varies by job classification | None, it is a rate on payroll | An office role and a roofing role are not remotely comparable |
Rates and thresholds change every year. Confirm the current figures in IRS Publication 15, the Employer's Tax Guide, and the wage base in the Social Security Administration contribution and benefit base table, before you run payroll or price a contract.
How do you calculate employee cost in Excel?
The trap in a spreadsheet version is the wage bases. Most homemade models multiply the rate by the full salary, which quietly overstates the cost of every employee earning above $9,000. The fix is MIN.
Employer taxes with the wage bases handled
Put the annual salary in B2, then each tax gets its own column so the model can be audited line by line.
Social Security = 0.062*MIN(B2,184500)
Medicare = 0.0145*B2
FUTA = 0.006*MIN(B2,7000)
State unemp. = $C$5*MIN(B2,$C$6)Absolute references on $C$5 and $C$6 point at a setup tab holding your state rate and wage base, so you change them in one place when the rate notice arrives. For a refresher on locking references, see our guide to multiplying in Excel.
Total cost, burden and the two hourly rates
With the cost columns running C2 to L2, paid hours in N2 and PTO hours in O2:
Total annual cost = B2+SUM(C2:L2)
Labor burden $ = M2-B2
Labor burden rate = (M2-B2)/B2
Fully burdened rate = M2/N2
Cost per prod. hour = M2/(N2-O2)Stopping the divide by zero errors
A roster template with blank rows will fill the burden column with #DIV/0! the moment someone has no salary yet. Wrap the two ratio columns: =IFERROR((M2-B2)/B2,"") returns an empty cell instead.
How do you calculate labor burden in Google Sheets?
Every formula above transfers unchanged, because MIN, SUM and IFERROR behave identically. Four things differ once you scale it to a roster.
| Task | Excel | Google Sheets |
|---|---|---|
| Capped tax on one row | =0.062*MIN(B2,184500) | Identical |
| Apply down a whole column | Fill down, or a table formula | =ARRAYFORMULA(0.062*MIN(B2:B,184500)) does not work, use MINIFS logic or IF(B2:B>184500,184500,B2:B) |
| Sum hours only on filled rows | =SUMIF(B:B,"<>",N:N) | Identical |
| Conditional cost rules | IF and IFS | IF, see our IF function guide for Google Sheets |
| Format burden as a percentage | Format Cells, Percentage | Format, Number, Percent |
The ARRAYFORMULA row is the one that catches people out. MIN collapses a range to a single value rather than working row by row, so an array version needs the IF form instead.
Labor burden rate, fully burdened rate and cost per billable hour are three different numbers
These three get used interchangeably in the same conversation, and they are not the same thing. Mixing them up is the most expensive mistake in this whole model, because two of them are used for pricing and they differ by 8 to 15%.
| Number | How it is calculated | On the example above | What it is actually for |
|---|---|---|---|
| Labor burden rate | (Total cost minus salary) / salary, shown as a percentage | 42.3% | Benchmarking and quick multipliers. Not a price. |
| Fully burdened hourly rate | Total annual cost / paid hours | $41.06 | Budgeting and headcount planning |
| Cost per productive hour | Total annual cost / hours actually worked | $44.48 | Pricing, quoting and job costing. This is your real floor. |
One rule worth writing down: the burden percentage falls as salary rises, because Social Security, FUTA and state unemployment all stop at a wage base while the salary keeps going. On the numbers in this calculator, a $20,000 employee carries a 103% burden and a $220,000 employee carries 19%. Applying one blended multiplier across a mixed roster will overprice your juniors and underprice your seniors.
Troubleshooting an employee cost spreadsheet
My burden percentage is over 100% and that looks wrong
It is probably right. Flat costs like health insurance and overhead do not scale with salary, so on a low wage they can exceed the wage itself. A $20,000 part-time role carrying a full $8,400 health plan and $6,000 of overhead genuinely costs more than double its salary.
My Social Security line keeps growing on high earners
The wage base cap is missing. =0.062*B2 has no ceiling, so a $220,000 salary produces $13,640 instead of the correct $11,439. Use =0.062*MIN(B2,184500).
The average hourly rate across my team is far too low
Blank template rows are almost always the cause. If the hours column is prefilled with 2,080 on rows that have no salary, the divisor includes people who do not exist. Use =SUMIF(B:B,"<>",N:N) so hours only count on rows with a salary entered.
My total does not match what payroll reports
Payroll reports employer tax cost, not fully loaded cost. Health insurance premiums, equipment, software and overhead are usually in different ledgers entirely, so a payroll export will always come in low. Reconcile the tax lines only, then add the rest separately.
The percentage columns show #DIV/0!
A blank salary cell. Wrap the calculation: =IFERROR((M2-B2)/B2,"") leaves the cell empty until a salary is entered, which keeps the summary tab clean.
Run this across a real roster, not one employee at a time
The Simple Sheets Payroll and HR templates carry the wage-base logic, benefits loading and per-head burden across your whole team, in both Excel and Google Sheets.
See the Payroll templateEmployee cost calculator FAQ
How much does an employee really cost?
Between 1.25 and 1.4 times base salary for most office roles. A $60,000 salary with typical benefits and overhead comes to about $85,000 a year. The multiplier is higher for low-wage roles, because flat costs like health insurance do not shrink with the salary, and lower for high earners, because the payroll tax wage bases cap out.
What is the formula for the true cost of an employee?
Total cost equals base wages plus employer payroll taxes plus benefits plus equipment plus allocated overhead. Employer payroll taxes are Social Security, Medicare, FUTA, state unemployment and workers compensation. Labor burden is everything above the wage line, and the labor burden rate is that figure divided by the salary.
What is a good labor burden rate?
For salaried office roles, 25 to 40% is a normal range once taxes, benefits and light overhead are counted. Trades and field roles run higher, often 50 to 70%, because workers compensation rates, vehicles and tools are far more expensive. There is no single correct figure, only your own numbers.
How do you calculate employee cost in Excel?
Give each cost its own column, then total them. The important part is capping the taxes that have a wage base: =0.062*MIN(B2,184500) for Social Security and =0.006*MIN(B2,7000) for FUTA. Medicare has no cap, so =0.0145*B2 is correct. Total annual cost is then =B2+SUM(C2:L2).
How do you calculate labor burden in Google Sheets?
The same formulas work because Google Sheets uses identical MIN, SUM and IFERROR functions. The one difference is scaling to a column. ARRAYFORMULA cannot use MIN row by row, because MIN collapses a range to one value, so use the IF form instead: =ARRAYFORMULA(IF(B2:B>184500,184500,B2:B)*0.062).
Does the employer pay the same payroll taxes as the employee?
Partly. The employer matches the employee's 6.2% Social Security and 1.45% Medicare. It does not match the 0.9% Additional Medicare tax on wages over $200,000. It also pays FUTA and state unemployment, which the employee pays nothing toward, and it pays workers compensation premiums.
Why is my fully burdened hourly rate different from my cost per billable hour?
Different divisors. The fully burdened rate divides annual cost by paid hours, usually 2,080. Cost per billable or productive hour divides by hours actually worked, after PTO, holidays and training come out. On a $60,000 salary with 160 hours of PTO, that is $41.06 against $44.48. Quote against the second number.
How much does it cost to hire an employee, on top of their salary?
One-time hiring costs typically run $4,000 to $5,000 per hire for a standard role, covering job advertising, recruiter or referral fees, background checks and the productivity dip while someone gets up to speed. These sit outside the annual burden, so model them as a separate first-year line rather than folding them into an hourly rate.
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Last updated: 6 September 2026. Federal figures shown are for tax year 2026. General information only, not tax, payroll or legal advice.