# How much does an employee cost?

Works out the yearly cost of an employee in 2026: wages plus the employer’s Social Security, Medicare, federal and state unemployment taxes and benefits, as a total, a monthly and an hourly cost.

- Page: https://www.acalculator.org/finance/employee-cost-calculator
- JSON spec: https://www.acalculator.org/finance/employee-cost-calculator.json
- Version: 1b77372ecad2

## Default answer

Example with the default inputs (Yearly wages $60,000.00, Paid hours a year 2,080, State unemployment tax rate 2.7%, State unemployment wage base $7,000.00, Health insurance a month (optional) $0.00, Retirement contribution (optional) 0%, Other yearly costs (optional) $0.00): An employee paid $60,000.00 a year costs about $64,821.00 in 2026, or $31.16 an hour.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| wages | Yearly wages | Gross wages you pay the employee in 2026, before any deductions. |
| hours | Paid hours a year | Hours you pay for in a year, for the hourly cost: 2,080 is 40 hours × 52 weeks. |
| suta | State unemployment tax rate | Your state unemployment (SUTA) rate from the state’s rate notice. The default is only an example. |
| sutabase | State unemployment wage base | Wages per employee your state taxes for unemployment each year. The default is only an example. |
| health | Health insurance a month (optional) | What you pay toward the employee’s health insurance each month. |
| match | Retirement contribution (optional) | What you put into the employee’s retirement plan, as a percent of wages. |
| other | Other yearly costs (optional) | Other yearly costs of the job: workers’ comp insurance, equipment, software, training. |
| futacr | FUTA credit reduction (optional) | Extra FUTA rate in a credit reduction state, as the Form 940 instructions list it; 0 elsewhere. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| total | Total yearly cost | Wages + employer taxes + benefits and other costs. |
| taxes | Employer payroll taxes | Social Security + Medicare + FUTA + state unemployment tax. |
| socialSecurity | Social Security (employer share) | 6.2% of wages up to the $184,500 wage base. |
| medicare | Medicare (employer share) | 1.45% of all wages. |
| futa | Federal unemployment tax (FUTA) | (6.0% − 5.4% credit + any credit reduction) × wages up to $7,000. |
| suta | State unemployment tax | State rate × wages up to the state wage base. |
| benefits | Benefits and other costs | Health insurance × 12 + retirement percent × wages + other yearly costs. |
| monthly | Cost a month | Total yearly cost ÷ 12. |
| hourly | Cost an hour | Total yearly cost ÷ paid hours a year. |
| share | Cost as a share of wages | Total yearly cost ÷ wages: 110% means the employee costs 10% more than the wages. |

## Method

Social Security = 6.2% × the smaller of wages and $184,500. Medicare = 1.45% × wages. FUTA = (6.0% − 5.4% + credit reduction) × the smaller of wages and $7,000. State unemployment = state rate × the smaller of wages and the state wage base. Benefits = health insurance × 12 + retirement percent × wages + other costs. Total = wages + the four taxes + benefits.

## Assumptions

- Wages paid in 2026 (IRS Publication 15, 2026). All wages count for Social Security, Medicare and unemployment tax (no pre-tax cafeteria plan deductions).
- The employer is liable for FUTA, pays state unemployment tax on time and takes the full 5.4% credit; a credit reduction is added only when typed.
- The state rate and wage base are typed by you; the defaults are only examples.
- An estimate, not tax advice. Additional Medicare Tax is the employee’s alone and is not an employer cost.

## Worked examples

1. wages = $60,000.00, hours = 2,080, suta = 2.7%, sutabase = $7,000.00 gives socialSecurity = $3,720.00, medicare = $870.00, futa = $42.00, suta = $189.00, taxes = $4,821.00, total = $64,821.00, monthly = $5,401.75, hourly = $31.16, share = 108.035%. Source: IRS Publication 15 (2026): Social Security 6.2% each for employer and employee on wages up to $184,500, Medicare 1.45% each, no employer share of Additional Medicare Tax; section 14, FUTA 6.0% of the first $7,000 with a credit of up to 5.4% (0.6%), https://www.irs.gov/publications/p15.
2. wages = $200,000.00, hours = 2,080, suta = 3.4%, sutabase = $10,000.00, health = $600.00, match = 4%, other = $0.00 gives socialSecurity = $11,439.00, medicare = $2,900.00, futa = $42.00, suta = $340.00, taxes = $14,721.00, benefits = $15,200.00, total = $229,921.00. Source: IRS Publication 15 (2026): Social Security 6.2% each for employer and employee on wages up to $184,500, Medicare 1.45% each, no employer share of Additional Medicare Tax; section 14, FUTA 6.0% of the first $7,000 with a credit of up to 5.4% (0.6%), https://www.irs.gov/publications/p15 (Social Security stops at $184,500).
3. wages = $50,000.00, hours = 2,080, suta = 2.7%, sutabase = $7,000.00, futacr = 1.2% gives futa = $126.00, taxes = $4,140.00, total = $54,140.00. Source: IRS Publication 15 (2026): Social Security 6.2% each for employer and employee on wages up to $184,500, Medicare 1.45% each, no employer share of Additional Medicare Tax; section 14, FUTA 6.0% of the first $7,000 with a credit of up to 5.4% (0.6%), https://www.irs.gov/publications/p15; IRS Instructions for Form 940 (credit reduction adds to the 0.6% rate), https://www.irs.gov/instructions/i940.
4. wages = $5,000.00, hours = 520, suta = 2.7%, sutabase = $7,000.00 gives socialSecurity = $310.00, medicare = $72.50, futa = $30.00, suta = $135.00, total = $5,547.50, hourly = $10.67. Source: IRS Publication 15 (2026): Social Security 6.2% each for employer and employee on wages up to $184,500, Medicare 1.45% each, no employer share of Additional Medicare Tax; section 14, FUTA 6.0% of the first $7,000 with a credit of up to 5.4% (0.6%), https://www.irs.gov/publications/p15.

## FAQ

### How much does an employee cost on top of wages?

In 2026 the employer pays 6.2% Social Security on wages up to $184,500, 1.45% Medicare on all wages, federal unemployment tax (usually $42 a year), state unemployment tax, and any benefits. A $60,000 employee with a 2.7% state rate on the first $7,000 and no benefits costs $64,821, about 8% over the wages.

### What payroll taxes does an employer pay in 2026?

Social Security: 6.2% of each employee’s wages up to $184,500. Medicare: 1.45% of all wages. FUTA: 6.0% of the first $7,000 of wages, less a credit of up to 5.4% for state unemployment tax, so 0.6% or $42 per employee. State unemployment tax at your state’s rate on its wage base.

### Does the employer pay the 0.9% Additional Medicare Tax?

No. The employer withholds 0.9% Additional Medicare Tax from wages over $200,000, but it is the employee’s tax: there is no employer share.

### How do I find my state unemployment tax rate?

Your state workforce or unemployment agency sends a rate notice each year; new employers get the state’s new-employer rate. Each state also sets its own wage base, which can be more than the $7,000 federal one. Type both into the calculator; the 2.7% on $7,000 default is only an example.

### What is a FUTA credit reduction?

When a state has borrowed from the federal unemployment fund and not repaid it, employers there get a smaller credit, so they pay more FUTA. The Department of Labor names the states each November and the IRS lists them in the Form 940 instructions. Type the reduction (for example 1.2%) if your state is one.

### What other costs should I include?

Health insurance, retirement contributions, workers’ compensation insurance, equipment, software, training and payroll services. Put health insurance in its own box and the rest in other yearly costs. The workers comp premium calculator can estimate the insurance.

## Sources

- IRS, Publication 15 (2026), Employer’s Tax Guide: What’s New (Social Security 6.2% each for employer and employee, wage base $184,500; Medicare 1.45% each, no wage base); section 9 (no employer share of Additional Medicare Tax); section 14, Federal Unemployment (FUTA) Tax (6.0% on the first $7,000 of wages; credit of up to 5.4%; 0.6% after the full credit; credit reduction states). https://www.irs.gov/publications/p15 (retrieved 2026-10-18)
- IRS, Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return (credit reduction states and Schedule A). https://www.irs.gov/instructions/i940 (retrieved 2026-10-18)