Employee Cost Calculator

Rates below are from IRS Publication 15 (2026) and apply per employee per calendar year. Verified September 2026.

FUTA credit reduction. The 5.4% credit shrinks in states that owe the federal unemployment trust fund. For 2025, the Department of Labor set reductions for California (1.2%) and the U.S. Virgin Islands (4.5%), so a California employer paid 1.8% on the first $7,000, or $126 per employee instead of $42. DOL lists California (1.5%) and the Virgin Islands (4.8%) as potential 2026 credit reduction states; the final list is set after November 10, 2026, and the extra tax is due with the fourth-quarter FUTA deposit.

Other state and local employer taxes. Paid family and medical leave programs charge employers in Colorado (at least 0.44% with 10+ employees), Delaware, the District of Columbia (0.75%), Maine, Massachusetts, Minnesota (new in 2026), Oregon and Washington, usually on wages up to the $184,500 Social Security wage base; Maryland starts in 2027. New York and Hawaii employers pay disability insurance costs above the employee's capped share, Vermont charges a 0.44% Child Care Contribution, and Nevada's Modified Business Tax takes 1.17% of total wages above $50,000 a quarter. Local employer payroll taxes include the MCTMT in the New York City commuter district, the TriMet and Lane Transit taxes in Oregon, Newark's 1% payroll tax, Pittsburgh's 0.55% payroll expense tax and Denver's $4 monthly Occupational Privilege Tax. Enter your employer rate in the Other field.

Workers' compensationis insurance, not a tax, but every state except Texas requires most employers to carry it. Premiums are quoted per $100 of payroll by class code. The presets are each state's calculated manual rate in effect January 1, 2024, from the Oregon Department of Consumer and Business Services' 2024 premium rate ranking, whose national median index rate was $1.09 per $100. Your insurer applies its own rates, experience modification and credits.

Each state taxes wages up to its own base and assigns new employers a starting rate for their first one to three years. Figures come from the U.S. Department of Labor's Significant Provisions of State UI Laws, January 2026, checked against each state workforce agency in September 2026. Rates include surcharges the state bills on the same wages; notes flag industry-based and construction rates.

A high wage base matters more than a high rate: Washington's base of $78,200 means SUTA keeps applying to a $60,000 salary all year, while Texas stops at $9,000. Once you receive your own rate notice, type that rate into the calculator.

A burdened labor rate is what one productive hour of an employee costs you after taxes, insurance, benefits, time off and overhead. It is the number contractors, agencies and service businesses should price from, because billing at the wage rate loses money on every hour. Worked example with the calculator's defaults (Texas office employee, 2026):

1. Total annual cost: $74,902.00. Salary $60,000 + Social Security $3,720.00 + Medicare $870.00 + FUTA $42.00 + Texas SUTA $243.00 (2.7% of $9,000) + workers' comp $42.00 ($0.07 per $100) + single health coverage $7,885.00 + 3% match $1,800.00 + hiring cost $300.00 ($1,200 over 4 years).
2. Productive hours: 1,936. 2,080 paid hours (40 × 52) minus 144 hours of PTO and holidays (18 days × 8 hours).
3. Burdened rate: $38.69 per hour. $74,902 ÷ 1,936, against a base rate of $28.85 ($60,000 ÷ 2,080). The burden multiplier on salary is 1.25x; per productive hour it is 1.34x.
4. Job cost and price. A 12-hour job carries $464.27 of labor cost (12 × $38.69). A 25% markup makes the price $580.34, a 20.0% gross margin.

Markup and margin are not the same number: a 25% markup yields a 20% margin, and a 50% markup a 33.3% margin. Overhead that is not tied to one employee, such as rent, vehicles, liability insurance and the owner's time, belongs in the markup. Check that the price clears your fixed costs with the break-even calculator, and convert pay rates with the hourly to salary calculator.

The fair comparison is the contractor's hourly rate against the employee's burdened cost per productive hour. In the Texas example that break-even rate is $38.69. A contractor at $45 per hour for the same 1,936 hours would cost $87,120 a year, which is $12,218 more than the employee. Model your own numbers with the 1099 vs W-2 calculator.

Cost does not decide classification. The IRS looks at behavioral control, financial control and the relationship of the parties, and misclassifying an employee exposes you to back payroll taxes and penalties; see IRS guidance on independent contractors versus employees. Our guides to employees vs contractors, 1099 vs W-2 and payroll tax due dates cover the filing side.