🧾 True Cost of an Employee Calculator
The wage is the sticker price; the real cost includes payroll taxes, workers comp, benefits, and the tools they need. Rule of thumb says 1.2 to 1.4 times the wage, but your numbers deserve better than a rule of thumb.
True cost per month
$4,380
True cost per year
$52,556
True cost per hour
$25.29
Times the wage
1.26x
A $20 an hour hire really costs $25 an hour (1.26 times the wage): $4,380 a month, $52,556 a year. For the hire to make sense, they need to help generate meaningfully more than that.
Estimates for planning, not financial advice. Your real numbers will vary; that is exactly why you track them.
Good questions about this math
Is it cheaper to use contractors?
Per hour, often yes: no payroll taxes or benefits. But contractors set their own methods and juggle other clients, and misclassifying an employee as a contractor carries real penalties. Use contractors for defined projects, employees for the core engine.
When can I afford my first hire?
When the tasks you would hand off either directly generate more than the true cost or free enough of your time to. Run this calculator, then check the P&L calculator with payroll included to see if the business still nets positive.
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