Question 1

How much does an employee actually cost above their salary?

Accepted Answer

Total employment cost is typically 1.25x to 1.4x base salary. A $100K employee costs $125,000-$140,000 all-in. The overhead comes from: payroll taxes (7.65% FICA, FUTA, SUTA), health benefits ($10,000-$20,000/year employer share), 401k match (3-6% of salary), equipment, software, and office space. Large companies with richer benefits can hit 1.5x.

Question 2

What payroll taxes does an employer pay?

Accepted Answer

US employer payroll taxes: Social Security (6.2% up to $168,600 wage base), Medicare (1.45% on all wages, 0.9% additional for high earners), FUTA (6% on first $7,000, typically 0.6% after credit), SUTA (varies by state and experience rating, 0.1%-6.5%). Total employer payroll tax burden: approximately 7.5-10% on top of salary.

Question 3

Is it cheaper to hire a contractor instead of an employee?

Accepted Answer

Contractors cost more per hour (no benefits subsidy, no job security) but avoid overhead. Rule of thumb: a contractor at $80/hour costs the same all-in as an employee at $100K salary ($48/hour billing). Use contractors for: under 6-month projects, specialized skills, uncertain needs. Hire employees for: core functions, long-term need, knowledge-retention-critical roles.

Question 4

How much does remote work reduce employee costs?

Accepted Answer

Remote employees eliminate office space cost ($5,000-$20,000/year per seat in major cities). Companies often offset with: remote work stipends ($1,200-$2,400/year), home internet reimbursement, coworking memberships. Net savings: $3,000-$15,000 per employee annually depending on location. This is why remote-first companies can pay 10-20% higher salaries and still save money.

Employee Total Cost Calculator — True All-In Hiring Cost

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