What This Calculator Does
The employee cost calculator shows the fully burdened cost of a W-2 employee — not just their hourly wage, but payroll taxes, workers' compensation, and benefits layered on top. This "burdened rate" is what actually shows up in your job costs.
Contractors who bid jobs using an employee's wage alone consistently underprice labor, since the true cost is typically 25–50% higher than the wage.
What Makes Up the True Cost of an Employee
- Gross wages: The base hourly rate paid to the employee.
- Employer payroll taxes: Social Security, Medicare, federal and state unemployment insurance (FICA, FUTA, SUTA) — typically 7-10% of wages.
- Workers' compensation insurance: Premiums vary widely by trade risk class, from a few percent for low-risk office roles to 15%+ for roofing or high-risk field trades.
- Benefits and overhead: Health insurance, paid time off, tools, training, and safety equipment provided to the employee.
Add these together and divide by annual hours worked to find the true burdened hourly rate — the number that belongs in your job cost estimates.
Using This in Your Bids
Always price labor into a job using the burdened rate, not the wage. If a crew member earns $28/hour but their burdened cost is $38/hour, pricing a job with $28/hour labor cost understates your true expense by over 35% — a gap that comes straight out of profit.
Frequently Asked Questions
What is the true cost of an employee beyond their wage?
It typically includes employer payroll taxes (7-10% of wages), workers' compensation insurance (varies by trade, often 5-20%), and benefits like health insurance and PTO — often adding 25-50% on top of the base wage.
Why is workers' comp so different by trade?
Workers' comp premiums are set by risk classification. High-injury trades like roofing carry much higher rates than lower-risk office or estimating roles.
Should I use wage or burdened rate when bidding jobs?
Always use the burdened rate — it reflects the actual cost of that employee's labor, including taxes, insurance, and benefits, not just their paycheck.
How much does an employee cost beyond salary on average?
A common rule of thumb is 1.25 to 1.5 times the base wage once payroll taxes, workers' comp, and benefits are included, though it varies by trade and state.
Related Calculators
These tools work best when used together with this calculator.
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