Labor cost
calculator.

How much does an employee cost on top of their wage?

Employer payroll taxes alone add about 8–9% for most employees; with benefits, US government data puts the average at about 43% of wages: in June 2026 private employers paid $46.89 an hour in total compensation, of which $32.82 was wages and $14.07 (30% of the total) was benefits, according to the Bureau of Labor Statistics. Legally required costs (Social Security, Medicare, unemployment insurance and workers’ compensation) were $3.40 an hour, 7.2% of compensation. Health insurance is usually the largest voluntary cost: KFF’s 2025 survey found employers paid on average $7,885 of a $9,325 single-coverage premium (about $657 a month), which is this calculator’s default.

How is overtime calculated?

Under the federal Fair Labor Standards Act, non-exempt employees earn at least 1.5× their regular rate for hours over 40 in a workweek. Long days alone do not count: four 12-hour days (48 hours) earn 8 overtime hours, but three 12-hour days earn none. California adds daily rules, so the same three 12-hour days earn 12 hours at 1.5×. California never counts an hour twice: daily overtime hours are excluded when checking the 40-hour weekly limit. A few other states and many union contracts also have daily overtime; use the Custom rule to model them.

Which employer taxes apply, and when do they stop?

Employers pay 6.2% Social Security on wages up to the annual wage base ($184,500 in 2026 and $192,300 in 2027, so at most $11,439 and $11,922.60 per employee) and 1.45% Medicare on all wages. The extra 0.9% Additional Medicare Tax on wages over $200,000 is withheld from the employee; employers do not match it. Federal unemployment tax (FUTA) is 6.0% of the first $7,000 per employee, normally reduced to 0.6% ($42) by the credit for state unemployment tax; employers in credit-reduction states pay more (California’s reduction for 2025 was 1.2 points). State unemployment (SUTA) rates and wage bases vary by state and employer, from a $7,000 base in states such as California and Florida to $78,200 in Washington in 2026.

Paid time off and cost per productive hour

Holidays, vacation and paid sick days are paid but not worked, and under the FLSA they do not count toward overtime. Fifteen paid days off at 8 hours a day is 120 paid hours with no output, so the cost of each hour actually worked rises. The calculator reports both cost per paid hour and cost per worked hour; use the worked-hour figure for pricing jobs or billing rates.

Salaried employees

A salaried employee’s cost uses the salary as pay with no overtime. Federally, most overtime-exempt jobs must pay at least $684 a week ($35,568 a year); California requires at least $70,304 in 2026. If the salary is below the federal level, or the job does not meet the duties tests, the employee may be owed overtime: model them as hourly instead.

From labor cost to an hourly price

To keep a target margin on labor, divide the cost per hour worked by (1 − margin). An employee costing $34.85 per hour worked must be billed at $49.79 for a 30% margin; adding 30% on top of cost gives only $45.31, a 23% margin. Labor cost as a share of revenue shows how much of each dollar earned goes to wages, taxes and benefits.