Finance Calculator
Labor Cost Calculator
Work out what an employee actually costs — wages plus employer taxes, benefits and overhead. Get the loaded cost per hour, the burden rate, and totals for a whole team, for hourly or salaried staff on any period basis.
Labor Cost Calculator
Wages, employer taxes, benefits and overhead
All amounts below are per week
per week
FICA alone is 7.65%; add unemployment on top
per week, per employee
Workers' comp, training, kit
Assumes identical terms across the team
Results
Total Labor Cost
$1,118.00
per week
Cost Per Hour
$27.95
1.27× the wage rate
Cost Composition
Cost by Period (Per Employee)
| Period | Wages | Burden | Total |
|---|---|---|---|
| Weekly ← | $880.00 | $238.00 | $1,118.00 |
| Bi-weekly | $1,760.00 | $476.00 | $2,236.00 |
| Monthly | $3,813.33 | $1,031.33 | $4,844.67 |
| Annual | $45,760.00 | $12,376.00 | $58,136.00 |
Different views of one cost, each rounded independently. Rows are not additive.
At Other Employer Tax Rates
The burden adds 27.05% on top of wages, giving a loaded cost multiplier of 1.2705×. Budgeting commonly assumes 1.25× to 1.4× for US employees.
Each hour costs $27.95 fully loaded against $22.00 of wages — the figure to use when pricing work or quoting a job, rather than the wage rate.
For reference, 2026 US employer payroll taxes are 6.2% Social Security on the first $184,500 of wages, 1.45% Medicare with no cap, and FUTA at an effective 0.6% on the first $7,000. State unemployment is set by each state and commonly falls between 2% and 4%.
This is the employer's cost, not the employee's pay. Employee-side withholding comes out of the gross wages shown here rather than adding to them.
Step-by-Step Calculation
Hourly · Weekly basis · 1 employee
Step 1 — Gross wages per employee
Gross Wages = Hourly Rate × Hours
Gross Wages = $22.00 × 40 h = $880.00 per week
Step 2 — Employer taxes
Employer Taxes = Gross Wages × tax rate
Employer Taxes = $880.00 × 10% = $88.00
Step 3 — Total labor cost per employee
Total = Gross Wages + Taxes + Benefits + Other Overhead
Total = $880.00 + $88.00 + $150.00 + $0.00
Total = $1,118.00 per week
Step 4 — Labor cost per hour
Cost Per Hour = $1,118.00 ÷ 40 h = $27.95
Result
$1,118.00 per week — $27.95 an hour
Wages Are Not the Cost
A $22-an-hour employee does not cost $22 an hour. Add employer payroll taxes and benefits and the real figure on Example 1 is $27.95 — 27% more than the wage rate, and that is before any equipment or training.
The gap is the labor burden, and it is the single most common omission in job pricing. Quote a job at the wage rate and you have given away the entire burden on every hour billed.
Expressed as a multiplier, Example 1 is 1.2705× — so wages × 1.27 gives the loaded cost. Most US employers land between 1.25× and 1.4×, which makes the multiplier a fast sanity check on any labour estimate.
Labor Cost Formulas
1. Gross Wages
2. Employer Taxes
3. Total Labor Cost
4. Per Hour and Burden
Where the Money Goes
Example 1 broken out as shares of the total cost:
| Component | Weekly | Share | Annual |
|---|---|---|---|
| Gross wages | $880.00 | 78.7% | $45,760.00 |
| Employer taxes (10%) | $88.00 | 7.9% | $4,576.00 |
| Benefits | $150.00 | 13.4% | $7,800.00 |
| Total labor cost | $1,118.00 | 100% | $58,136.00 |
Wages are under 79% of the cost. The remaining 21.3% is what gets forgotten — and on an annual basis it is $12,376 that has to come from somewhere.
How Benefits Move the Burden
Holding $22 an hour, 40 hours and 10% employer taxes, and varying only the weekly benefits:
| Benefits | Total Cost | Burden Rate | Multiplier | Per Hour |
|---|---|---|---|---|
| $0 | $968.00 | 10.00% | 1.1000× | $24.20 |
| $50 | $1,018.00 | 15.68% | 1.1568× | $25.45 |
| $100 | $1,068.00 | 21.36% | 1.2136× | $26.70 |
| $150 | $1,118.00 | 27.05% | 1.2705× | $27.95 |
| $250 | $1,218.00 | 38.41% | 1.3841× | $30.45 |
| $400 | $1,368.00 | 55.45% | 1.5545× | $34.20 |
Taxes alone put the floor at 1.10×. Benefits do most of the work above that, and a generous package can push the multiplier past 1.5× — meaning the employee costs more than half again their wages.
US Employer Payroll Taxes in 2026
The calculator takes a single blended rate. These are the components it represents:
| Tax | Employer Rate | Wage Base | Max Per Employee |
|---|---|---|---|
| Social Security | 6.20% | $184,500 | $11,439.00 |
| Medicare | 1.45% | no cap | unlimited |
| FUTA (after credit) | 0.60% | $7,000 | $42.00 |
| State unemployment | 2%–4% typical | state-set | varies |
| FICA combined | 7.65% | — | — |
FICA is the floor at 7.65%, with unemployment on top, so a blended rate of 8% to 12% covers most employers. Note how small FUTA actually is — capped at $42 a year per employee, it is under 0.1% of a $55,000 salary despite the headline 0.6%.
Why a Flat Rate Breaks Down for High Earners
Social Security stops at $184,500 of wages in 2026. Above that, only the 1.45% Medicare continues, so a flat 7.65% applied to the whole salary overstates the employer's real liability:
| Annual Salary | Flat 7.65% | Actual FICA | Overstated By |
|---|---|---|---|
| $100,000 | $7,650.00 | $7,650.00 | $0.00 |
| $184,500 (the cap) | $14,114.25 | $14,114.25 | $0.00 |
| $200,000 | $15,300.00 | $14,339.00 | $961.00 |
| $250,000 | $19,125.00 | $15,064.00 | $4,061.00 |
| $400,000 | $30,600.00 | $17,239.00 | $13,361.00 |
Below the cap a flat rate is exact, which is why it works for most employees. Above it the effective FICA rate falls — 7.65% at $184,500 but only 6.03% at $250,000 — so the calculator flags the crossing and suggests lowering the entered rate rather than silently overstating the cost.
Scaling to a Team
On the Example 1 terms, with everyone on identical pay:
| Employees | Weekly Cost | Annual Cost | Hours a Week |
|---|---|---|---|
| 1 | $1,118.00 | $58,136 | 40 |
| 3 | $3,354.00 | $174,408 | 120 |
| 5 | $5,590.00 | $290,680 | 200 |
| 10 | $11,180.00 | $581,360 | 400 |
| 25 | $27,950.00 | $1,453,400 | 1,000 |
| 50 | $55,900.00 | $2,906,800 | 2,000 |
The per-employee cost is rounded to cents first and then multiplied, so a team of five costs exactly five identical payslips — no stray cents from scaling an unrounded figure. For genuinely mixed roles, run each group separately and add the totals.
Benefits of Using the Labor Cost Calculator
Example Calculations
Three cases worked through step by step:
Example Scenario 1 — Single Hourly Employee
$22 an hour, 40 hours a week, 10% employer taxes, $150 of benefits.
Gross Wages = $22 × 40 = $880.00
Employer Taxes = $880 × 10% = $88.00
Benefits = $150.00
Total Labor Cost = $880 + $88 + $150 = $1,118.00 per week
Cost Per Hour = $1,118 ÷ 40 = $27.95 against a $22 wage rate
Burden adds 27.05% on top of wages — a 1.2705× loaded multiplier
Example Scenario 2 — Salaried Employee
$55,000 annual salary, $12,000 of combined taxes and benefits.
Gross Wages = $55,000.00 per year
Taxes + Benefits = $12,000.00
Total Labor Cost = $55,000 + $12,000 = $67,000.00
Burden rate = $12,000 ÷ $55,000 = 21.82%
Loaded multiplier = 1.2182×
Over 2,080 hours that is $32.21 an hour fully loaded
Example Scenario 3 — Team of 5
Five employees on the Example 1 terms.
Per employee = $1,118.00 per week
Team Total = $1,118 × 5 = $5,590.00 per week
Team wages alone = $880 × 5 = $4,400.00
Team hours = 40 × 5 = 200 hours a week
Annualised: $5,590 × 52 = $290,680
Per-employee cost is rounded first, so the total equals 5 identical payslips
Getting the Burden Right
A single blended tax percentage is an approximation in two directions. Social Security stops at $184,500 of wages in 2026, so a flat rate overstates the cost for high earners — by $4,061 on a $250,000 salary. Unemployment taxes run the other way: FUTA applies only to the first $7,000 of wages and most state bases are similarly low, so a rate that includes them overstates the cost of anyone earning well above that base. Where precision matters, compute each tax against its own wage base rather than blending. The commonly missed items are paid time off, which is paid hours with no output and typically adds around 8% to the cost per productive hour, plus workers' compensation premiums that vary enormously by job classification, recruitment and onboarding amortised over expected tenure, and the employer share of equipment, software and workspace. Team figures assume identical terms, so mixed roles should be run separately. Everything here is the employer's cost: employee withholding comes out of the gross wages shown, not on top of them. Rates are the 2026 US federal figures and change annually. This is general information, not tax or payroll advice.
Frequently Asked Questions
- What is total labor cost?
- Everything an employer pays to employ someone: gross wages plus employer payroll taxes, benefits and any allocated overhead. A $22-an-hour employee working 40 hours costs $880 in wages but $1,118 once 10% taxes and $150 of benefits are added.
- How do you calculate labor cost per hour?
- Divide the total labor cost by the hours worked. On Example 1 that is $1,118 ÷ 40 = $27.95 an hour, against a $22 wage rate. The loaded figure is the one to use when pricing work, because it is what the hour actually costs you.
- What is the labor burden rate?
- Everything above wages, expressed as a percentage of wages. Example 1 has a $238 burden on $880 of wages, or 27.05%. Multiply wages by 1.2705 to get the loaded cost. Most US employers land somewhere between 1.25× and 1.4×.
- What employer payroll taxes apply in the US?
- For 2026: Social Security at 6.2% on the first $184,500 of wages, Medicare at 1.45% with no cap — 7.65% combined — plus FUTA at an effective 0.6% on the first $7,000 and state unemployment set by each state, commonly 2% to 4%. A blended rate of 8% to 12% is typical.
- Why does a flat tax percentage overstate the cost for high earners?
- Because Social Security stops at $184,500 of wages in 2026. On a $250,000 salary a flat 7.65% gives $19,125, but the actual employer FICA is $15,064 — an overstatement of $4,061. Below the cap the flat rate is exact, which is why the calculator only flags it above that point.
- What should go in benefits versus other overhead?
- Benefits covers health insurance, retirement matching and paid leave accruals. Other overhead is for workers' compensation premiums, training, equipment, software licences and recruitment amortisation. The split is only for clarity — both are added the same way, so what matters is not counting anything twice.
- How much does paid time off add?
- More than people expect, because it is paid hours with no output. Two weeks of vacation plus ten holidays is twenty days, or roughly 7.7% of a 260-day work year — so the cost per *productive* hour is around 8% higher than the cost per paid hour.
- Can I use this for a whole team?
- Yes, if everyone is on comparable terms. The per-employee cost is rounded to cents first and then multiplied, so a team of five costs exactly five identical payslips. For genuinely mixed roles, run each group separately and add the totals.
- Why do the period rows not multiply up exactly?
- They are different views of one cost, each rounded independently, rather than amounts that add together. A weekly figure times 52 can land a few cents from the annual figure — rounding, not an error. The monthly row also uses twelve equal months rather than 4.33 weeks.
- Is this the employer cost or the employee take-home?
- The employer cost. Employee-side withholding — their half of FICA, income tax, benefit contributions — comes out of the gross wages shown here rather than adding to them. The employee sees less than $880; the employer pays $1,118.