Labor Cost Calculator (True Cost of an Employee)

Estimate the true hourly and annual cost of an employee: wages plus employer payroll taxes, insurance and benefits (labor burden).

$per hour
Your rate is remembered on this device.
h/week
weeks
%
As a % of wages. BLS ECEC (June 2026): private-industry benefits averaged $14.07 per $32.82 of wages per hour worked, about 43% of wages. Small employers with few benefits are often 20–30%.
Your rate is remembered on this device.
True hourly cost
$32.50
Total annual cost
$67,600.00
Annual wages
$52,000.00
Annual burden (taxes, insurance, benefits)
$15,600.00
Wages as % of total cost
76.9 %
Average monthly cost
$5,633.33

Estimate generated with SortedSums: https://sortedsums.com/labor-cost-calculator/. For informational purposes only; verify before relying on it.

Estimate only. This tool is for informational and educational purposes. Results depend on your inputs and simplifying assumptions, and are not a substitute for professional engineering, design or financial advice. Always verify with a qualified professional and applicable codes before purchasing, building or making decisions.

How it’s calculated

An employee costs more than their wage. Employers also pay payroll taxes (in the U.S.: the employer half of Social Security and Medicare, federal and state unemployment tax), workers' compensation insurance, and benefits such as paid leave, health insurance and retirement contributions. Together these are the labor burden.

True hourly cost = Wage × (1 + burden%) Annual wages = Wage × hours/week × weeks/year Total annual cost = Annual wages × (1 + burden%)

Example: $25/hour, 40 hours × 52 weeks = 2,080 hours, 30% burden. Annual wages = 25 × 2,080 = $52,000; burden = $15,600; total = $67,600, a true cost of 25 × 1.30 = $32.50 an hour.

Benchmark: the U.S. Bureau of Labor Statistics Employer Costs for Employee Compensation (June 2026) put private-industry compensation at $46.89 per hour worked: $32.82 wages (70%) and $14.07 benefits (30%), which is a burden of about 43% of wages. Your own figure depends on your benefits, state taxes and insurance rates.

Frequently asked questions

What is a typical labor burden?

It varies widely. Using BLS ECEC averages for private industry, benefits add roughly 43% on top of wages; small firms offering only legally required benefits are often well under that.

Does this include overhead like office space?

No. It covers costs tied to employing the person. Add equipment, software, space and supervision separately when pricing jobs.

Should I count paid holidays as hours?

Here hours and weeks are paid hours. If you pay 52 weeks but the person works 48, the cost per productive hour is higher; enter productive weeks to see it.

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Sources

Formulas are taken from the free public references above. Results are provided “as is” for informational and educational purposes only. See our disclaimer.

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