Employee cost calculator
See the true cost of hiring beyond the base salary — retirement, leave, overhead, and more.
Calculator businessLogic updated April 2026
This calculator estimates the fully-loaded annual cost of an employee — base salary plus employer retirement contributions, insurance, payroll tax, and overhead — and converts that total into a cost-per-productive-hour figure. The fully-loaded number is typically 30–50% higher than the headline salary, and the cost-per-hour figure accounts for the fact that paid leave and sick days aren't worked but still cost the employer.
How this is calculated
Formula
totalAnnualCost = salary × (1 + retirement% + insurance% + payrollTax% + overhead%) / 100 + training ; productiveHours = weeklyHours × (52 − leaveWeeks − sickWeeks) ; costPerHour = totalAnnualCost / productiveHoursStep-by-step
- Start with the gross annual salary
- Add employer retirement contribution (salary × retirement %)
- Add insurance and benefit costs (salary × insurance %)
- Add payroll tax where applicable (salary × payroll tax %)
- Add overhead allocation — desk, software, utilities, support functions (salary × overhead %)
- Add the annual training budget
- Calculate productive hours per year: weekly hours × (52 − paid leave weeks − sick leave weeks)
- Divide total annual cost by productive hours to get cost per productive hour
- Rounding mode
- ROUND_HALF_UP
- Precision
- 20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
- Logic last reviewed
Assumptions & limitations
What this calculator assumes
- Leave and sick leave weeks are paid but non-productive — split out of salary for the breakdown chart
- Employer retirement contribution, insurance, payroll tax, and overhead are percentages of gross annual salary
- Cost per hour is calculated using productive hours only: weeklyHours × (52 − leave weeks − sick leave weeks)
- Payroll tax defaults to 0 because it varies by jurisdiction — override when modelling regionally
- Taxes and inflation are not modelled
What this calculator doesn’t account for
- Does not model variable bonuses, equity grants, or profit sharing
- Does not include recruitment costs (agency fees, internal recruiting time)
- Does not include termination costs (notice periods, severance, redundancy payments)
- Does not factor in jurisdiction-specific mandatory leave entitlements that differ from inputs
- Does not model variable productive output across roles or seniority levels
Worked example
A business is costing a full-time role at $90,000 base salary, 11% employer retirement contribution, 3% insurance, 5% payroll tax, 30% overhead, $1,500 annual training, working 38 hours/week with 4 weeks annual leave and 2 weeks sick leave.
| Input | Value |
|---|---|
| Annual salary | $90,000 |
| Employer retirement | 11% |
| Insurance / payroll tax / overhead | 3% / 5% / 30% |
| Training | $1,500 |
| Weekly hours / leave / sick | 38 / 4 weeks / 2 weeks |
Total annual cost: ~$135,600 — Productive hours: 1,748 — Cost per hour: ~$77.55
On-costs total 49% of salary ($90,000 × 49% = $44,100), plus the $1,500 training budget = $135,600 total cost. Productive hours: 38 × (52 − 4 − 2) = 38 × 46 = 1,748 hours. Cost per productive hour = $135,600 ÷ 1,748 = $77.55. The headline $90,000 salary is equivalent to about $48/hour — the loaded cost-per-hour is 60% higher because of on-costs and non-productive paid time.
Frequently asked questions
What are employee on-costs?
All the additional costs an employer incurs on top of base salary: retirement contributions, insurance, payroll tax, overhead allocation, training, equipment, and benefits. On-costs typically add 30–50% to the salary, so a $100,000 salary translates into $130,000–$150,000 of total cost. Knowing this is essential for project pricing, capacity planning, and benchmarking compensation.
How much does an employee really cost beyond salary?
Most jurisdictions push employer-side costs to 20–35% of salary just from mandatory contributions and taxes. Add overhead (office space, software licences, equipment, share of management and HR functions) and you typically reach 40–60% on top of base. For knowledge workers in expensive locations, the loaded cost can be more than 1.7× the salary.
What is an on-cost multiplier?
A shortcut for estimating fully-loaded cost: multiply salary by a factor (e.g. 1.4× or 1.5×) to estimate total cost. Useful for quick capacity planning when you don't want to itemise. This calculator gives you the actual percentage breakdown so you can derive your own multiplier — for the worked example above, the multiplier is 1.51 ($135,600 ÷ $90,000).
How do on-costs vary by industry?
Heavy-industry roles often have higher mandatory insurance (workers' compensation premiums scale with risk), so on-costs can run 35–50% just from insurance. Knowledge-work roles have lower insurance but higher overhead (real estate, software, IT support). Government roles often have higher retirement contributions. The percentages in this calculator are configurable so you can match the profile of your specific industry and role.
Why use productive hours, not total hours?
Because the employee isn't producing output during paid leave and sick days, but the employer still pays salary during those weeks. A cost-per-hour figure based on total paid hours (52 weeks × 38 = 1,976 hours) understates the true cost of each working hour. Productive-hour cost is the right number for pricing client work, calculating fair internal charge-out rates, and budgeting project labour.
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