Employee Cost Calculator
See what an employee really costs once employer contributions, benefits, equipment, office space and hiring are added to the salary, per year, per month and per hour worked.
Pay before the employee's own tax, without bonus or allowances.
Enter your country's employer contributions (social security, pension, payroll tax and benefits) as one %. Left empty, it counts as 0.
Levies, accident insurance, training funds or anything else charged as a %.
Yearly bonus or a 13th month (8.33%).
Money set aside each year for a payout when the job ends. Rules differ by country: see the UAE gratuity calculator; for India's provident fund, the India EPF calculator.
Housing, transport, phone, meals.
What the employer pays for cover.
Laptop spread over its life, licences.
Rent, utilities and services per person.
Courses, certificates, conferences.
One-off: agency fee, job ads, visa, onboarding.
The hiring cost is spread over these years.
Share of working hours a client pays for (utilisation).
Profit as a share of the rate you bill.
Where the money goes
| Cost | A year | A month | Share |
|---|
Hires compared
| Hire | Salary a year | Total a year | A month | An hour | Rate to bill |
|---|
How your employee cost is worked out
Cost per hour = (salary + everything the employer pays on top) ÷ hours actually worked.
- 1
Salary a year
$50,000 a year= $50,000
- 2
Add employer costs
$50,000 + $0= $50,000+0% on salary
- 3
Hours worked
232 days × 8 h= 1,856 hours
- 4
Cost per hour
$50,000 ÷ 1,856= $26.94 an hour
Read more: the formula, a worked example, what to include and the related country calculators
An employee costs more than their salary. On top of the pay, the employer usually pays social security or pension contributions and payroll taxes, and often a bonus, allowances, health cover, a laptop and software, a desk and some training, plus the cost of finding them in the first place. And they are not working every day they are paid for: public holidays, paid leave and sick days all come out of the hours you get.
The formula
yearly salary = salary × 12 (a month) or × hours a week × 52 (an hour)
employer % costs = salary × (contributions % + other taxes %)
total cost = salary + bonus + allowances + employer % costs + end-of-service accrual + health + equipment + office + training + recruitment ÷ years expected to stay
working days = days a week × 52 − public holidays − paid leave − sick days
cost per hour = total cost ÷ (working days × hours a day)
markup over salary = (total cost ÷ salary − 1) × 100
cost per billable hour = total cost ÷ (working hours × billable %)
rate to bill = cost per billable hour ÷ (1 − margin %)
Worked example
An employee is paid $50,000 a year for a 40-hour, 5-day week, with 8 public holidays and 20 days of paid leave. No employer on-costs are entered yet.
- Total cost: $50,000 + $0 = $50,000 a year, or $50,000 ÷ 12 = $4,166.67 a month. Markup over salary: 0%.
- Working days: 5 × 52 = 260, minus 8 holidays and 20 days of leave = 232 days.
- Working hours: 40 ÷ 5 = 8 hours a day, so 232 × 8 = 1,856 hours.
- Cost per hour worked: $50,000 ÷ 1,856 = $26.94. Cost per working day: $50,000 ÷ 232 = $215.52.
Now say your country's employer contributions are 20% of salary. That adds $50,000 × 20% = $10,000, so the total is $60,000 a year ($5,000 a month), the markup is 20%, and each hour worked costs $60,000 ÷ 1,856 = $32.33.
Billing the hours out
If the employee does client work, not every hour can be billed: meetings, admin and training take time. At 75% billable time, the $60,000 employee has 1,856 × 75% = 1,392 billable hours, so each one costs $60,000 ÷ 1,392 = $43.10. To keep a 30% margin on what you bill, charge $43.10 ÷ (1 − 0.30) = $61.58 an hour. A 30% margin is not the same as a 30% markup: adding 30% to cost ($56.03) only leaves a 23% margin.
What to include
- Employer contributions: social security, state or private pension, unemployment and payroll taxes the employer pays on top of the salary. Some have a ceiling on the salary they apply to; if so, work out the yearly amount and enter it as a % of the salary.
- Bonus and allowances: a yearly bonus or 13th month, housing, transport, phone or meal allowances.
- End of service: in some countries the employer owes a lump sum when the job ends. Setting aside a % each year spreads that cost. For the UAE, the UAE gratuity calculator shows what is owed; in India, the India EPF calculator shows provident fund contributions.
- Running costs: health insurance, a laptop spread over its life (a $1,500 laptop kept 3 years is $500 a year), software licences, a desk or office share and training.
- Hiring: agency fees, job ads, visas and onboarding time. A $6,000 hire that stays 3 years costs $2,000 a year.
This calculator does not build in any country's rates. Employer contributions, caps, gratuity and leave rules differ by country and change often, so take the figures from your tax office, labour ministry or payroll provider.
Common questions
How do I work out the true cost of an employee?
Start with the gross salary, then add everything the employer pays on top: social security and pension contributions, payroll taxes, bonus, allowances, health insurance, equipment, office space, training and a share of the hiring cost. On a $50,000 salary with 20% employer contributions, the yearly cost is $50,000 + $10,000 = $60,000, or $5,000 a month.
How much does an employee cost per hour?
Divide the yearly cost by the hours they actually work, not by every hour they are paid for. A 40-hour, 5-day week gives 260 days. Take off 8 public holidays and 20 days of paid leave and 232 days are left, which is 1,856 hours. $60,000 ÷ 1,856 = $32.33 an hour.
What employer contribution rate should I use?
It depends on the country, and sometimes on the salary, the type of contract and the employee's nationality. This calculator does not assume any rate: enter your own country's figure from the tax office or your payroll provider. For the UAE, use our UAE gratuity calculator for end-of-service pay, and for India our EPF calculator for provident fund contributions.
What is a cost multiplier or markup over salary?
It shows how much more than the salary an employee really costs. If a $50,000 salary costs $65,000 in all, the employee costs 1.3 times their salary, a markup of 30%. Many businesses find this lies somewhere between 1.2 and 1.5 times, but your own numbers are what count.
What hourly rate should I bill for an employee?
Work out the cost per billable hour first: the yearly cost divided by the hours they spend on client work. With $60,000 of cost, 1,856 working hours and 75% billable time, that is $60,000 ÷ 1,392 = $43.10 an hour. For a 30% margin, divide by 0.7: $61.58 an hour.
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