Beaconshire Advisory · www.beaconshireadvisory.com · True Employee Cost & Can-I-Afford-to-Hire Calculator (2026) · printed
Calculator · Operations
What does this hire really cost — and when does it pay for itself?
Base pay is the smallest honest number. This calculator adds the 2026 employer payroll taxes, your state’s unemployment insurance, workers’ compensation for the job class, benefits and paid time off, then the recruiting and equipment you pay once — and converts all of it into cost per productive hour, the revenue the role has to generate, and the payback month.
Where the money goes
Base pay is only part of the annual cost.
Line-by-line cost
Annual amounts and the cost per paid hour of each component.
What this means
Reading the hire the way a CFO would.
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How it works
Methodology & assumptions
- Employer payroll taxes (2026). Social Security 6.2% on wages up to
$184,500; Medicare 1.45% with no cap; FUTA 6.0% less the 5.4% state credit = 0.6% on the first $7,000 (plus the credit-reduction rate in states with outstanding federal loans — California 1.2% for 2025); state unemployment at your rate on your state’s taxable wage base (defaults: 2026 new-employer rate and base from the EY state survey; Indiana $9,500 at 2.5%). - Workers’ compensation is premium as a percentage of payroll. Defaults are approximate class averages: clerical about 0.4%, retail and healthcare 1.5–2%, light industrial 4%, drivers 6%, skilled trades 8–12%, roofing and heavy construction 20%+. The national average across all employers is about $0.98 per $100 of payroll (NASI, 2023 data). Use your policy rate.
- Benefits. Employer health contribution × 12, retirement match × base pay, other benefits × 12. For reference, employer-sponsored premiums averaged $9,325 single / $26,993 family in 2025, with employers paying 84% / 74% (KFF).
- Productive hours = paid hours − (PTO + holidays) × hours per day. Cost per productive hour = annual recurring cost ÷ productive hours. First-year cost per productive hour also reflects the ramp (productive hours during the ramp × productivity %).
- Revenue needed = loaded cost ÷ gross margin: the revenue whose gross profit covers the hire. For billable roles, billings = rate × productive hours × utilization, and contribution = billings − loaded cost. Payback is the first month cumulative contribution (after ramp) recovers the one-time costs.
- Not modeled. Overtime, bonuses, state disability and paid-leave taxes (CA, NJ, NY, WA, etc.), local payroll taxes, ACA employer-mandate penalties, management time spent supervising, and the productivity drag on the rest of the team during ramp.
This calculator is an educational estimate built from published figures and the assumptions listed above. It is not tax, legal, or financial advice, does not account for every provision that may apply to you, and is not a substitute for a return prepared from your actual records. Figures are checked when published and may lag mid-year changes.
Questions
Common questions
Is 1.25–1.4× still the right rule of thumb?
As a floor, yes. Statutory costs alone add about 9–12% in most states, and any meaningful health contribution pushes the multiplier toward 1.4× or beyond for moderate salaries. BLS data for mid-2026 puts benefits at 30% of total compensation across private industry — roughly 1.43× wages. For a $40,000 role with family health coverage, 1.6× is not unusual.
Should I compare this to hiring a contractor?
Only after the classification question is settled. If the business controls how, when and where the work is done, the worker is likely an employee regardless of the contract, and misclassification brings back payroll taxes, penalties and state audits. If the role legitimately qualifies as contract work, the comparison is simple: the contractor’s invoice versus the loaded cost here.
What utilization should I assume for a billable hire?
Senior professionals in small firms commonly bill 60–75% of available hours; junior staff can run higher; anyone who also sells, manages or administers runs lower. The calculator shows what five points of utilization is worth, which is usually more than a rate increase.
What about the owner’s time?
Hiring is supposed to buy it back. If the hire frees ten hours a week of your time, value those hours at what you would otherwise earn with them — selling, pricing, or simply not burning out — and add it to the revenue side. It is the most under-counted return on a first hire.
Does this work for a part-time hire?
Yes — set hourly pay and the actual weekly hours. Note that FUTA and most state unemployment bases are per employee, not per hour, so two part-time hires cost more in unemployment tax than one full-time hire for the same hours.
Keep going
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Hiring, payroll and the numbers behind them?
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