Go beyond the salary โ see every tax, fee, and benefit you're on the hook for before your next hire.
~32%Average hidden cost above base salary
7.65%Minimum payroll tax every employer pays
50 StatesReal unemployment rates built in
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Enter Your Hiring Details
Tap the ? button next to any field for a plain-English explanation of what it means
Annual Salary or Contract Rate
What is this? Enter the total annual pay you plan to offer โ before any taxes are taken out. If you're thinking hourly, multiply: $25/hr ร 40 hrs ร 52 weeks = $52,000. For a contractor, enter what you'd pay them annually at their rate. This is the starting point โ everything else is added on top.
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State (Unemployment Insurance Rate)
What is SUTA? Every US state runs its own Unemployment Insurance (UI) program. As an employer, you pay a percentage of each employee's wages into this fund every quarter โ so if they're ever laid off, they can collect unemployment benefits. This is called SUTA (State Unemployment Tax Act).
You pay it 100% โ it is never deducted from the employee's paycheck
Applies only to the first $7,000โ$9,000 of wages per year (wage base varies by state)
New employers get a standard starting rate shown in the dropdown below
Your rate can increase if you lay off many workers, or decrease over time if you rarely do
Example: California SUTA 3.4% on first $9,000 = $306/year per employee
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Job Category (Workers Comp Rate)
What is Workers Compensation? It's mandatory insurance you must purchase for every W2 employee. If they get hurt on the job, workers comp pays for their medical bills and lost wages โ protecting both them and you from a lawsuit.
The rate is based on how physically risky the job is:
๐๏ธ Construction / Heavy Labor (10%) โ general laborers, roofers, welders, heavy machinery operators
1099 contractors must carry their own workers comp policy โ your cost is $0.
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Hours Per Week
What is this for? This is used to calculate your employee's true hourly cost once all taxes and benefits are added. For example, a $65,000 employee working 40 hrs/week has a sticker hourly rate of $31.25 โ but their true all-in hourly cost is closer to $40โ$45. This helps you compare fairly with a contractor's hourly rate.
Benefits Package
What's included in each option?
๐ซ None ($0/yr) โ No employer-provided benefits. The employee pays for all their own health insurance, retirement savings, etc. Common for part-time hires, short contracts, or very early-stage startups.
๐ก Basic (~$7,500/yr) โ A lean but real-world package: health insurance contribution (~$5,500), dental & vision (~$1,000), minimal 401(k) match (~$1,000). Typical for small businesses trying to stay competitive without overspending.
โ Full Package (~$16,000/yr) โ Comprehensive health/dental/vision (~$10,000), 401(k) at 4% match, 15 days paid time off (worth ~$3,750 on a $65k salary), life insurance, and payroll processing fees. Standard for attracting quality candidates in competitive markets.
๐ก
True monthly cost (W2 Employee)
Monthly cost (1099 Contractor)
True hourly cost (W2 all-in)
๐ W2 Employee You pay all of this
Base Salary
Social Security (6.2%)
Medicare (1.45%)
FUTA โ Federal UI
SUTA โ State UI
Workers Comp Insurance
Benefits Package
TOTAL TRUE COST
๐งพ 1099 Contractor They handle taxes
Contract Rate
Social Security$0 โ contractor pays
Medicare$0 โ contractor pays
FUTA โ Federal UI$0 โ not required
SUTA โ State UI$0 โ not required
Workers Comp$0 โ they carry own
Benefits$0 โ not provided
TOTAL TRUE COST
๐ W2 Cost Breakdown โ Where Does the Money Go?
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Why Your Employee Costs More Than Their Salary
When most business owners post a $60,000 job listing, they budget $60,000. The real number โ after mandatory payroll taxes, federal and state unemployment insurance, workers comp, and even a basic benefits package โ lands closer to $78,000โ$85,000. That gap of $15,000โ$25,000 catches small business owners off guard every single year.
A 1099 contractor shifts most of those costs onto themselves โ they pay their own self-employment taxes and carry their own insurance. The trade-off is they often charge a higher rate to compensate. This calculator gives you the true side-by-side so you can make a real financial decision, not a guess.
7.65%
Minimum employer payroll tax on every dollar of W2 salary (Social Security + Medicare combined)
+$16K
Average annual cost of a full benefits package including health insurance, dental, vision and 401k match
~32%
Typical true cost premium above base salary for a W2 employee with a standard benefits package
Frequently Asked Questions
A W2 employee typically costs 25%โ40% more than their base salary. For a $60,000/year hire, the true annual cost โ including payroll taxes (7.65%), federal and state unemployment insurance, workers comp, and a basic benefits package โ usually lands between $75,000 and $85,000. This calculator breaks down every single line item so there are no surprises.
FICA stands for the Federal Insurance Contributions Act and covers Social Security (6.2%) and Medicare (1.45%). Both you and your employee pay it separately โ your employee's share is deducted from their paycheck, while your share is an additional cost on top of their salary that they never see. For a $65,000 salary, your employer FICA contribution alone is $4,972 per year.
Both are unemployment insurance taxes paid entirely by you, the employer. FUTA (Federal Unemployment Tax Act) is 6% on the first $7,000 of wages โ but if you pay your state taxes on time, you get a 5.4% federal credit, reducing your effective FUTA rate to just 0.6% (max $42/employee/year). SUTA (State Unemployment Tax Act) is set by your state and varies from 1%โ5% for new employers, applied to the first $7,000โ$9,000 of wages. This calculator shows both.
Yes โ at the same base pay, a contractor costs significantly less because you skip payroll taxes, unemployment insurance, workers comp, and benefits. However, experienced contractors typically charge 20%โ40% higher hourly rates to cover their own self-employment taxes (15.3%) and benefits. The key question is whether their higher rate is still less than the full W2 overhead. Use this calculator to find your exact break-even point.
Employee misclassification is one of the most actively audited issues by the IRS and state labor agencies. Penalties include back payroll taxes with interest, fines ranging from $50 to $1,000 per worker per violation, and potential criminal charges for intentional misclassification. The IRS uses a behavioral control, financial control, and relationship test to determine proper worker status. Always consult a CPA or employment attorney before classifying any worker as a contractor.
Workers compensation premiums are calculated based on risk โ how likely it is that a worker in that role gets injured on the job. The National Council on Compensation Insurance (NCCI) assigns every job type a classification code and corresponding rate. An office worker has very little injury risk (rate: ~0.5%), while a construction laborer faces significant daily physical danger (rate: 10%+). Most states legally require you to carry workers comp from day one for all W2 employees.