What this calculator does
An employee does not cost their salary. On top of it sit retirement contributions, payroll tax, workers compensation insurance and a per-head share of equipment, software and space, and together those routinely add a quarter to a third. Budgeting a role at its advertised salary is one of the more common ways a hiring plan goes wrong.
On the figures here, an $85,000 salary costs $108,298, a multiplier of 1.274. That is the number to use when valuing someone's time, which matters as soon as you start counting interview hours or working out what a project really costs.
The formula
The percentage on-costs are applied to base salary and added, then the fixed per-head costs are added on top. Those two behave differently as salary changes: the percentage component scales with the salary while the fixed component does not, so the multiplier falls as salaries rise. Every rate is a field because retirement contribution rates, payroll tax and workers compensation vary by jurisdiction, industry and payroll size, and most of them change year to year.
| Term | Meaning |
|---|---|
| On-costs | Everything the employer pays above salary. Also called employment overheads or loading. |
| Payroll tax | A state or regional tax on total wages, often with a threshold below which it does not apply. |
| Fixed cost per head | Equipment, software licences, desk space. Independent of salary. |
| Multiplier | Total cost divided by base salary. The quick figure to carry around. |
The inputs explained
| Field | What to enter |
|---|---|
| Base salary ($) | Base salary before any on-costs. |
| Employer retirement contribution (%) | Employer retirement or pension contribution as a percentage of salary. |
| Payroll tax (%) | Payroll tax rate. Many jurisdictions apply it above a threshold, so a small employer may pay nothing at all. |
| Workers compensation insurance (%) | Workers compensation premium as a percentage of wages. Varies enormously by industry. |
| Other on-costs (%) | Anything else proportional to salary: leave loading, levies, insurance above the statutory minimum. |
| Fixed cost per head ($) | Per-head costs that do not scale with salary. Laptop, software, desk, phone. |
| Productive hours a year (h) | Productive hours a year after leave and public holidays. Around 1,800 is typical for a full-time role on a 38 to 40 hour week. |
When to use it
Budgeting a new role
Multiply rather than add. A role advertised at $85,000 needs $108,298 in the budget on these figures, and getting that wrong by 27 per cent across several hires is a material planning error.
Valuing internal time
The cost per productive hour is the figure to use when counting interview time, meeting time or project effort. At $60.17 an hour, a four-person two-hour meeting costs $481.
Comparing a contractor rate
A contractor at $90 an hour looks expensive against a $47 an hour salary and is close to level against a $60 loaded cost, before accounting for the leave and notice an employee carries and a contractor does not.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
What does each on-cost add?
Only the employer retirement contribution changes.
| Retirement contribution | Total cost of employment | Multiplier on base salary | Cost per productive hour |
|---|---|---|---|
| 0% | $98,097.50 | 1.154× | $54.50 |
| 5% | $102,347.50 | 1.204× | $56.86 |
| 9.5% | $106,172.50 | 1.249× | $58.98 |
| 12% | $108,297.50 | 1.274× | $60.17 |
| 15% | $110,847.50 | 1.304× | $61.58 |
Does the multiplier hold across salary levels?
All the rates are identical and only the salary changes.
| Base salary | Total cost of employment | On-costs as a share of salary | Multiplier on base salary |
|---|---|---|---|
| $50k | $66,175.00 | 32.4% | 1.324× |
| $70k | $90,245.00 | 28.9% | 1.289× |
| $85k | $108,297.50 | 27.4% | 1.274× |
| $120k | $150,420.00 | 25.4% | 1.254× |
| $200k | $246,700.00 | 23.4% | 1.234× |
Questions
Is a 1.3 multiplier about right?
As a rough planning figure for a salaried role with typical on-costs, yes, but it is not universal. It falls as salary rises because fixed per-head costs stop mattering, and it varies widely by jurisdiction and industry. Work it out rather than assuming it.
Should payroll tax apply to the retirement contribution too?
In some jurisdictions yes, and this page applies every percentage to base salary only. Where the base is wider, raise the payroll tax rate slightly to compensate, or add the difference to the other on-costs field.
What about recruitment and training?
Not included, because they are one-off rather than ongoing. Cost per hire covers the recruiting side separately.
Why 1,800 productive hours?
A full-time year is around 2,080 hours before leave. Taking out annual leave, public holidays and typical sick leave lands near 1,800. Use your own figure if you track it, since the hourly cost moves with it directly.
Does this work for part-time staff?
Yes, if you enter their actual salary and pro-rata the fixed costs and hours. The fixed per-head costs often do not halve for a half-time employee, which is why part-time roles carry a higher multiplier.
For the recruiting cost of filling the role, see cost per hire, and for what the team produces against what it costs, revenue per employee. Pay period conversions are on the salary converter.