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The Real Cost of an Employee

A $60,000 salary with 25% benefits, 7.65% payroll tax, and 20% overhead has a fully loaded cost of $91,590 — 53% above base pay. The salary is only two-thirds of what the hire truly costs.

Results

Visualization

Cashbizly provides illustrative business estimates only. Results depend on your inputs and assumptions and are not accounting, tax, or legal advice. Consult a CPA or financial advisor before major decisions. Tax-year figures (mileage, QBI, SEP, etc.) are labelled by year and should be verified at IRS.gov.

How It Works

Loaded Cost = Salary x (1 + Benefits% + Payroll Tax% + Overhead%). Employer payroll tax is 7.65% (6.2% Social Security + 1.45% Medicare) on wages up to the Social Security wage base. Benefits commonly run 20-30% of pay; overhead (space, equipment, management) another 15-25%.

What Should You Do?

Scenario 1: a 'cheap' $40k hire can really cost $61k loaded. Scenario 2: trimming benefits from 30% to 20% saves ~$6k per employee. Scenario 3: compare to a contractor at $50/hr part-time before assuming employee is cheaper.

Frequently Asked Questions

Why include overhead?

Space, software, and management are real costs often forgotten, making hires look cheaper than they are.

Payroll tax above the wage base?

Social Security tax stops at the annual wage base; Medicare continues. Use ~7.65% as a default and adjust for high earners.

How does this compare to 1099?

Contractors avoid employer payroll tax and benefits but add their own. See our 1099 vs W2 tool.

Authoritative References

IRS — Employer Payroll Taxes — Employer Social Security, Medicare, and FUTA.
Bureau of Labor Statistics — Benefits — Employer costs for employee compensation (benefits share).