Cost of an employee
The cost of an employee is what you spend to employ one person: gross wages plus employer payroll taxes, workers’ compensation, and benefits.
- LAW
- Employer FICA, 26 U.S.C. §3111
- BOUNDARY
- Social Security share stops at $184,500 (2026)
- FORMULA
- Sum wages, employer taxes, comp, benefits, overhead
- WATCH FOR
- Adding employee withholding to your cost
Pay by job
What 41 jobs pay from BLS medians, nationally and by state, with this calculator run on each job's median:
Gross payGross pay. Gross pay is the total amount an employee earns in a pay period before taxes, benefits, and other deductions are subtracted.Click to open the term is only the starting point. On top of it you pay your share of Social Security and Medicare, federal and state unemployment tax, workers’ compensationWorkers’ compensation. Workers’ compensation is state-mandated insurance that pays medical expenses and partial lost wages when an employee is injured or becomes ill because of their job.Click to open the term premiums, and your contribution to benefits such as health coverage and retirement plans. You can also assign overhead, such as equipment and training, for a fully loaded figure. To find the cost, add gross wages, employer payroll taxesPayroll tax. Payroll tax is the umbrella term for every tax an employer calculates, withholds, or owes because it paid wages.Click to open the term, workers’ compensation, and benefits, then any overhead you assign. Taxes withheld from the employee’s pay are not added again.
How do you calculate the cost of an employee?
Start from gross wages, then add each employer cost. Employer FICAFICA. FICA is the federal law, and the payroll tax under it, that funds Social Security and Medicare through matching employee and employer shares.Click to open the term is 6.2% Social Security on wages up to $184,500 (2026) plus 1.45% Medicare on all wages. FUTAFUTA. FUTA is the federal unemployment tax you pay on the first $7,000 of each employee’s wages a year, with nothing withheld from pay.Click to open the term is 6.0% of the first $7,000 of wages, or 0.6% after the maximum 5.4% credit, which requires state unemployment tax paid in full, on time, and on all FUTA wages, in a state with no credit reduction. State unemployment tax and workers’ compensation depend on your state and job classes. The example assumes all $60,000 is subject to FICA and FUTA.
| COST | HOW YOU FIGURE IT | ON WAGES OF $60,000 A YEAR (2026) |
|---|---|---|
| Gross wages | Salary or hourly pay, overtime, bonuses, paid time off | $60,000 a year |
| Social Security, employer share | 6.2% of wages up to $184,500 (2026) | $3,720 |
| Medicare, employer share | 1.45% of all wages | $870 |
| FUTA | 0.6% of the first $7,000, with the maximum credit | $42 |
| State unemployment and workers’ compensation | Your assigned state rate; your insurer’s class rates | Varies |
| Benefits | Your share of premiums and retirement contributions | Varies |
| Cost of an employee | The sum of every row | $64,632 a year plus the rows that vary |
Work it out: one employee, one year
Enter the year’s gross wages, then your state unemployment rate and wage base, workers’ compensation rate, benefits, and overhead. The card adds each employer cost in the order of the table above and shows the total as a multiple of wages.
One year, 2026: $60,000 in wages, before state rates and benefits
Employer cost of one employee for calendar year 2026: 6.2% Social Security on wages up to $184,500 (2026), 1.45% Medicare, and FUTA at 0.6% of the first $7,000 a year with the full 5.4% credit, plus the state unemployment, workers’ compensation, benefits, and overhead you enter, with all wages subject to FICA and FUTA. It leaves out credit reduction states, pay that FICA or FUTA excludes, such as your health plan contributions, and how the cost spreads across pay periods. Other cases and state law can change the result.
Which amounts are not part of your cost?
Only what you pay on top of gross wages adds to the cost. Amounts withheld from the employee’s pay are part of the wages you already counted, so adding them again counts them twice. Additional Medicare TaxAdditional Medicare tax. Additional Medicare tax is a 0.9% employee-only Medicare tax you withhold on wages you pay an employee over $200,000 in a calendar year.Click to open the term is imposed only on the employee, and there is no employer share.
- Gross wages, including overtime, bonuses, and paid time off
- Your share of Social Security and Medicare
- FUTA and your state unemployment tax
- Workers’ compensation premiums
- Your share of health premiums and retirement contributions
- Overhead you assign, such as equipment and training
- Federal, state, and local income tax withheld
- The employee’s share of Social Security and Medicare
- Additional Medicare Tax
- The employee’s share of benefit premiums
- 401(k) deferrals
- Garnishments
How much do benefits add on average?
In June 2026, private industry employers spent $46.89 per hour worked on compensation: $32.82 in wages and salaries and $14.07 in benefits, per the Bureau of Labor Statistics. That puts total compensation at about 1.43 times wages and salaries. BLS counts paid leave, overtime, shift differentialsShift differential. A shift differential, also called a shift premium, is extra pay added to an employee’s base wage for working a less desirable shift.Click to open the term, and nonproduction bonuses as benefits, not wages, so its ratio runs higher than one built on gross pay. Budget from your own payroll figures instead.
| PRIVATE INDUSTRY, JUNE 2026 | WAGES AND SALARIES | BENEFITS |
|---|---|---|
| All | 70.0% | 30.0% |
| Full-time | 68.5% | 31.5% |
| Part-time | 80.0% | 20.0% |
Frequently asked
- Publication 15 (2026), (Circular E), Employer’s Tax Guide
- Publication 15-B (2026), Employer’s Tax Guide to Fringe Benefits
- 26 U.S. Code § 3111 - Rate of tax
- Employer Costs for Employee Compensation News Release - 2026 Q02 Results
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.