By Priya Raman, payroll tax and employment costs
The salary is the number on the offer letter. This is the number you actually write checks for.
Plan around this number, not the exact figure. Payroll tax and benefit costs shift by state and by plan.
One line item here is fixed, and the rest are numbers you control.
| Assumption | Value used here | Where it comes from |
|---|---|---|
| Employer payroll tax add-on | 9.15% of salary, fixed | 7.65% employer FICA share per the IRS, plus a working allowance of about 1.5 points for unemployment insurance |
| Equipment and software | Default $2,500/yr, editable | A starting figure for a typical desk-based role. Adjust to your actual hardware and license spend |
| Overhead (space, admin) | Default $6,000/yr, editable | A working allowance for a share of rent, utilities and administrative support |
| Benefits | Your input, % of salary | Set by you. Health, retirement and PTO costs vary widely by employer |
Run the calculator's own defaults: a $60,000 salary, benefits at 20% of salary, $2,500 in equipment and software, and $6,000 in overhead.
In plain terms, that $60,000 hire actually runs $85,990 once every line is counted, or about 1.43 times the number on the offer letter. Raise the benefits percentage or the equipment budget and the multiplier climbs from there.
Model the rest of the hiring decision with the turnover, contractor and freelance-rate calculators.
The 1.25 to 1.4 times salary benchmark is a useful starting point, not a precise answer. Employer FICA taxes add exactly 7.65 percent. State unemployment (SUTA) rates vary widely. Workers compensation is set by job class and state. Health insurance premiums depend on your plan and location. Retirement matches are discretionary. The actual multiplier for any individual hire can land above or below that range, depending on how generous your benefits are and where you operate.
Once you have the all-in number, use it. Budget the real cost when evaluating headcount. Compare it with contractor rates to determine which is actually cheaper for the role. Show the total compensation value to candidates who are focused only on salary. The number on the offer letter is the starting point, not the ending point, of what a new hire costs.
Typically 25-40% more, all-in.
Employer payroll taxes, benefits, PTO, equipment and overhead.
It prevents under-budgeting roles and mispricing client work.
No, it's an estimate.