Employee Cost Calculator

Sonary’s Employee Cost Calculator helps small and mid-sized businesses determine the actual cost of hiring an employee. It functions as a labor cost and employment calculator, combining salary, benefits, tools, overhead, and state taxes. Just enter your numbers, and the calculator shows your annual cost per hire, broken down by category.

No spreadsheets. No guesswork. Just a clear view of what each new hire will cost your business.

How to use the Employee Cost Calculator

The tool is built to be intuitive, so you can get answers fast without needing an HR degree. Here’s how to use it:

Step 1: Enter the employee’s base salary

Type in how much you plan to pay the employee each year. The default is $75,000, but you can adjust to any amount.

• Example: You enter $80,000

Step 2: Add employee benefits

Include any additional annual compensation you offer beyond salary, bonuses, stipends, perks, etc.

• Example: You enter $5,000

Step 3: Add software and tool costs

Enter the yearly cost of any tools or software this employee will use, such as project management apps, design software, or CRMs, for which you will need to pay for an additional seat.

• Example: You enter $1,200

Step 4: Add overhead

Estimate your overhead expenses for this role, such as office space, equipment, and admin costs.

• Example: You enter $3,000

Step 5: Select a state

You can select the state where the employee will work. The calculator will use that state’s corporate tax rate to estimate employer tax costs.

• Example: You select California (8.84%)

Step 6: Fill in employer contributions

Add your annual contribution amounts for health, dental, and vision insurance.

• Example:

• • Health: $5,000
  • Dental: $600
  • Vision: $300

Step 7: Add any additional expenses

Include any other recurring or one-time costs related to the employee, such as training, travel, onboarding, etc.

• Training: $800
• Travel: $1,200
• Onboarding: $1,000

Step 8: Review your results

That’s it! The calculator does the rest. You’ll see:

• Total annual cost to employ this person
• A breakdown of how much you’re spending on:
  • Salary
  • Benefits
  • Software and tools
  • Overhead
  • Taxes
  • Insurance contributions
  • Additional expenses
• The state tax rate applied in your calculation
• A visual donut chart showing how each cost category contributes to the total

The calculator highlights the whole picture, so you can budget confidently and make smarter hiring decisions backed by real numbers.

Key terms you should know to use the calculator

Understanding a few basic terms can make a big difference when calculating the cost of an employee. Here’s a quick glossary to help you get the most out of this calculator.

Base salary

The employee’s gross annual pay before taxes or benefits. This is the starting point for all labor cost calculations.

• Example: You offer a base salary of $80,000

Benefits 

Any non-salary compensation, like bonuses, stipends, or perks. These increase the true cost of employment.

• Example: A signing bonus and perks totaling $5,000

Software and tools

Annual cost of licenses or subscriptions that the employee needs to do their job, such as CRMs, design tools, or project management apps.

• Example: Project management software costs $1,200 per year

Overhead

General business expenses like office space or admin support, tied to employing someone.

• Example: You estimate $3,000 in overhead for this role

Employer contributions

Your annual costs for health, dental, and vision insurance. This can vary by company and coverage type.

• Example: You contribute $5,000 for health, $600 for dental, and $300 for vision

Additional expenses

The calculator can include additional costs, such as training, travel, onboarding, or one-off equipment purchases.

• Example: Training and travel total $2,000

State tax rate

The corporate tax rate applied to the base salary based on where the employee works. Each state has a different rate.

• Example: California’s rate is 8.84%, which adds $7,072 in tax to an $80,000 salary

Labor cost formula

A standard method to calculate the full cost of an employee. The calculator uses this to give you accurate totals.

• Formula: Base salary + benefits + tools + overhead + taxes + contributions + additional expenses

Total annual cost

The full cost of employing someone for one year. This includes everything, not just salary.

• Example: The total cost to employ someone with an $80,000 salary might be $105,872

How does it work? The formula behind the calculator

Want to know precisely how this employee cost calculator gets its results? Here’s a breakdown of the formulas used. It follows a standard labor cost formula to help you calculate the actual cost of an employee, based on real numbers from your business.

1. Add base costs

These are your core annual costs tied directly to the employee.

Formula:
Base Costs = Base Salary + Benefits + Software Costs + Overhead

Example:
Base Salary = $80,000
Benefits = $5,000
Software = $1,200
Overhead = $3,000
Base Costs = $89,200

2. Calculate taxes based on state

The calculator applies the selected state’s corporate tax rate to estimate employer-paid taxes.

Formula:
Tax Amount = Base Salary × State Tax Rate

Example:
$80,000 × 8.84 percent = $7,072

3. Add employer contributions

This includes annual contributions toward health, dental, and vision insurance.

Formula:
Employer Contributions = Health + Dental + Vision

Example:
Health = $5,000
Dental = $600
Vision = $300
Total Contributions = $5,900

4. Add any additional expenses

These can include training, equipment, travel, onboarding, or anything else you spend to support this employee.

Formula:
Additional Expenses Total = Sum of all custom inputs

Example:
Training = $1,000
Travel = $1,200
Equipment = $1,500
Total Additional Expenses = $3,700

5. Calculate total annual cost

This is the final output, the complete amount you’ll spend to employ this person for one year.

Formula:
Total Annual Cost = Base Costs + Tax Amount + Employer Contributions + Additional Expenses

Example:
$89,200 + $7,072 + $5,900 + $3,700 = $105,872

The calculator gives you a full breakdown of each component and a visual chart. Whether looking for a labor cost calculator, employee costs calculator, or employment calculator, this tool helps you budget confidently.

When should you use the employee cost calculator?

Knowing your employment costs is crucial for running a small or mid-sized business. Salaries are just the start. Add in taxes, benefits, software, and other overhead, and suddenly your labor budget can shift fast. This calculator shows the whole picture so you can make smarter decisions before you hire.

Here are the best times to use it:

1. When you’re recruiting new employees
   Before making an offer, run the numbers. Use the calculator to estimate the full cost of each candidate, not just the base salary. This will help you stay within budget and avoid surprises down the line.
2. When you’re planning payroll or headcount
   Knowing your labor costs lets you plan more accurately, whether adding one new hire or building a team. The calculator works as both an employee costs calculator and a labor cost calculator.
3. When your expenses are changing
   Maybe benefit costs went up. Maybe you’ve started offering more remote tools. Or maybe you’ve added new employee perks. Use the calculator to update your numbers and see how those changes affect the total.
4. When you’re comparing roles or locations
   Use it as a labor percentage calculator to compare costs by state or role type. Hiring in Florida may cost less than in California. This tool helps you run side-by-side comparisons quickly.
5. When you’re setting pricing or service rates
   If labor is a significant part of your costs, this tool can help you determine how much you need to charge to stay profitable. Knowing how to calculate labor costs is key to setting sustainable prices.

Understanding the calculator’s outputs

Once you’ve entered your data, the employee cost calculator gives you more than a number. It breaks everything down so you can see where your money’s going, what’s driving your costs, and how each hire affects your bottom line.

Total annual cost
This is the big number, the full cost of employing one person for a year. It includes salary, benefits, taxes, software, overhead, insurance contributions, and any custom expenses you entered. Use this number to budget accurately or compare hiring options.

Cost breakdown
You’ll see a donut chart that shows how your costs are distributed. Each slice represents a category: salary, taxes, or tools. This makes it easy to spot what’s eating up your budget and where you can trim.

Tax rate visibility
When you select a state, the calculator automatically applies that state’s corporate tax rate to your calculation. You’ll see the percentage applied and how much it adds to your total. This helps you compare costs by location.

Flexible inputs
Because every business is different, the calculator lets you add as many extra expenses as you need. From training to travel to equipment, you can fully customize the results.

The employee cost calculator is designed to show real-world hiring costs in seconds; no spreadsheets or manual formulas are required.

Other useful Sonary calculators to try

The Employee Cost Calculator is part of a full toolkit built to help small businesses make smarter, faster decisions about costs, pricing, and profitability. If you’re looking to go deeper, try these calculators:

Break-Even Calculator
Want to know how much you need to sell to cover your costs? This tool helps you figure out your break-even point so you can price more strategically and plan for profitability.

Credit Card Processing Fee Calculator
Understand what you’re paying to accept credit cards and find the most cost-effective option. This is great for small businesses looking to lower merchant account fees.

Pricing Strategy Calculator
If you’re unsure how to set your prices or whether you’re charging enough, this tool walks you through different models to find the right fit for your market, your margins, and your goals.

Marketing Planner
Estimate marketing spend and plan campaigns that align with your business goals. Ideal for teams looking to manage ROI and scale efficiently.

Lifetime Value (LTV) and Customer Time Value Calculator
See how much each customer is worth over time. This calculator helps you estimate customer lifetime value based on purchase frequency, retention, and average order value, so you can spend smarter on acquisition and retention.

These calculators work independently but are even more powerful when used together. Use them to build a complete financial picture of your business and make confident decisions at every stage.