True Cost of an Employee Calculator
A $60,000 salary really costs around $75,000 once benefits, payroll taxes, and overhead are counted. This free true cost of an employee calculator turns an employee's salary into their real annual and hourly cost — just enter the salary, a benefits percentage, PTO days, and any overhead. Results update instantly as you type.
Enter your numbers
Results update as you type. Costs shown are estimates, not accounting figures.
Your results
Enter your numbers and the true cost will appear here.
How to use this calculator
Enter the employee's gross annual salary first. Then set benefits & payroll taxes as a percentage of salary — the default of 25% covers Social Security, Medicare, unemployment insurance, health insurance, and retirement matching for a typical US employer. Adjust it up or down to match your actual plan.
Add the PTO days the employee gets per year (15 is a common default) and any direct overhead per year — equipment, software licenses, training, office space, or recruiting amortized per hire. Leave overhead at $0 if you want salary + benefits only.
The calculator updates instantly as you type. The big numbers are the true annual cost and the true hourly cost; the breakdown table shows the benefits cost in dollars, working hours after PTO, monthly cost, and the total as a multiple of salary. Press Calculate to recompute on demand.
How it works
The true annual cost is: true cost = salary × (1 + benefits% ÷ 100) + overhead. The benefits percentage covers the employer's share of payroll taxes and all benefits as one number, because that's how most employers budget — roughly 25 cents of benefits per dollar of salary.
The true hourly cost is: hourly cost = true annual cost ÷ (2,080 − PTO days × 8). A full-time year is 2,080 hours (40 hours × 52 weeks), minus 8 hours for every PTO day. For example, $60,000 × 1.25 = $75,000 true cost, and $75,000 ÷ 2,080 = $36.06/hour before PTO — the same hourly figure a raw salary-only calculation would call $28.85/hour.
These are estimates to guide budgeting and hiring decisions, not financial or accounting advice. The 25% default and typical 1.25–1.4× multiples are US averages — your state's payroll taxes, your benefits plan, and your overhead per employee will differ. Use the result as a planning figure, not a legal or accounting number.
Frequently asked questions
What is the true cost of an employee?
The true cost of an employee is everything you actually spend on them in a year: salary plus benefits, payroll taxes, insurance, paid time off, equipment, training, and overhead like office space. Research commonly puts the total at 1.25 to 1.4 times salary — so a $60,000 salary can really cost $75,000 to $84,000 a year. This calculator adds those layers up from your own numbers.
What percentage of salary do benefits and payroll taxes add?
For most US employers, benefits and payroll taxes add roughly 20–35% on top of salary. Payroll taxes alone (Social Security, Medicare, unemployment insurance) run about 8–10%, and health insurance, retirement matching, and PTO add the rest. This calculator defaults to 25%, a common estimate — adjust it up or down to match your situation.
How do I calculate an employee's true hourly cost?
Divide the true annual cost by the employee's actual working hours: 2,080 minus 8 hours for every PTO day they take. For example, $75,000 in true cost ÷ 2,080 hours = $36.06/hour. This calculator does the math for you, including the PTO adjustment.
Why does paid time off raise the hourly cost?
Because you pay for the full year but get fewer working hours back. Ten PTO days means 80 fewer working hours, so the same annual cost is spread over 2,000 hours instead of 2,080 — pushing the effective hourly rate up. Enter your PTO days above to see the effect.
Is this calculator's number an exact cost or an estimate?
It's an estimate, labeled as such. Your actual cost depends on your state's payroll taxes, your specific benefits plan, and your overhead per employee. The formula is standard — true cost = salary × (1 + benefits %) + overhead — but treat the result as a planning figure, not an accounting or legal number.