True cost = base salary + payroll taxes + benefits + overhead, all calculated as a percentage of salary and added on top. This gives you the real number to budget against — usually 25-40% above the salary you're offering.
Most first-time hiring managers budget off the salary alone and get blindsided by the real monthly cost. Payroll taxes, benefits, and overhead (equipment, software seats, extra office space) routinely add 25-40% on top of base salary — sometimes more depending on your benefits package.
The employer burden rate covers mandatory costs (payroll taxes, workers' comp) and optional-but-standard costs (health insurance, 401k match, PTO accrual). Overhead — laptops, software licenses, a desk — is a separate line but should still factor into your true hiring budget.
A $60,000 salary hire often actually costs $75,000 to $78,000 once payroll taxes (roughly 7.65% for the employer share of Social Security and Medicare in the US), benefits, and overhead are added — a burden rate of 25-30% is a common rough planning benchmark, though it varies by benefits package and location. Budgeting the fully-burdened number, not just the salary, avoids an unpleasant surprise on your first few payroll runs.
Why is payroll tax around 7.65%? That's the standard employer share of Social Security and Medicare (FICA) in the US. State unemployment insurance and other state-specific taxes can add more on top — check your state's rate.
Should I include recruiting costs? For a one-time view of true cost-to-hire, yes — job board fees, recruiter commissions, and interview time all count. This calculator focuses on ongoing annual cost; add one-time hiring costs separately when budgeting the first year.
How does this change for contractors vs. employees? Contractors (1099) don't require payroll tax or most benefits from you, which is why they often cost less on paper — but you lose the control and continuity of a W-2 employee. Factor in both cost and fit.