Employee Cost Calculator
Discover the true cost of hiring an employee. Calculate the burden rate multiplier and understand why a $50/hour employee costs much more than $50/hour.
Employee Cost Calculator
Calculate the true cost of hiring an employee
Nominal: $28.85/hr
Employer portion/year
Life insurance, perks
True Hourly Cost
$45.21/hr
1.42x the nominal hourly rate
$84,990
$7,083
$362
$64.58/hr
for 30% margin
The 1.42x Multiplier Explained
Detailed Breakdown
| Category | Annual | Hourly | % of Total |
|---|---|---|---|
| Base Salary | $60,000 | $31.91 | 70.6% |
| Health Insurance | $7,500 | $3.99 | 8.8% |
| Retirement Match | $2,400 | $1.28 | 2.8% |
| Payroll Taxes | $4,590 | $2.44 | 5.4% |
| Other Benefits | $1,000 | $0.53 | 1.2% |
| Training & Development | $1,500 | $0.80 | 1.8% |
| Equipment & Supplies | $2,000 | $1.06 | 2.4% |
| Office Space | $6,000 | $3.19 | 7.1% |
| Total | $84,990 | $45.21 | 100% |
A $60,000 salary ($28.85/hr nominal) actually costs you $45.21/hr when you factor in benefits, taxes, and overhead. That's a 1.42x multiplier. If billing this employee's time, charge at least $64.58/hr to make a 30% margin.
- *Your 1.42x burden multiplier is typical for employers
- *Nominal hourly rate ($28.85/hr) vs true cost ($45.21/hr) - a 57% difference
- *To make 30% profit, you need to bill at least $64.58/hr
How to Use This Calculator
Enter the annual salary you plan to offer. The calculator shows the nominal hourly rate for reference.
Add benefits costs including health insurance, retirement match percentage, and paid time off days. These vary significantly by company and location.
Include overhead costs like training budget, equipment, and office space allocation per employee.
Understanding Your Results
The burden multiplier shows how much total cost exceeds base salary. A 1.35x multiplier means every dollar of salary costs you $1.35 total.
True hourly cost is what each hour of employee time actually costs when you factor in all expenses and actual working hours (after PTO).
The billable rate tells you what to charge clients for this employee's time to achieve your target profit margin.
Frequently Asked Questions
What is the burden rate or burden multiplier?
The burden rate is the ratio of total employee cost to base salary. A 1.3x burden means a $50,000 salary actually costs $65,000 when you add benefits, taxes, and overhead. Most employers see a 1.25-1.4x multiplier.
What costs are included beyond salary?
Beyond salary, employers pay payroll taxes (FICA, unemployment), health insurance, retirement contributions, training, equipment, office space allocation, and other benefits. These hidden costs add up quickly.
Why does true hourly cost differ from salary-based hourly?
A $60,000 salary divided by 2,080 hours gives $28.85/hour. But employees get paid vacation, sick days, and holidays, reducing actual working hours. Add employer costs, and true hourly cost might be $40-50/hour.
How do I calculate billable rate from employee cost?
Divide true hourly cost by (1 - profit margin). For a $45/hour true cost and 30% profit margin: $45 / 0.70 = $64/hour billable rate. This ensures you cover costs and make profit on billable work.
What payroll taxes do employers pay?
In the US, employers pay 6.2% Social Security and 1.45% Medicare (7.65% total FICA), plus federal and state unemployment taxes (FUTA/SUTA). In the UK, employers pay National Insurance. Total typically ranges 7-15% of salary.
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