Cost to Hire Your First Employee

Hiring your first W-2 employee typically adds 20-35% on top of their hourly wage once you count employer payroll taxes (Social Security and Medicare match, federal and state unemployment insurance), workers' compensation, and any benefits you offer. An employee earning $25/hour can genuinely cost you $30-$34/hour once fully burdened — and that's before tools, PPE, or training time.

Beyond payroll, budget for onboarding time (yours and theirs, which is unbillable while they're learning your systems), tools or PPE you provide, potentially a uniform, and payroll software or a payroll service if you don't already have one — running payroll correctly, including tax withholding and filings, isn't something to handle informally once you have a W-2 employee.

The most common mistake first-time employers make is budgeting only the hourly wage and getting surprised by the burden rate a few months in. Use our Employee Cost Calculator to see the fully loaded cost before you commit — it changes whether hiring actually pencils out against the extra revenue that employee needs to generate.