Employee Cost Per Hour Calculator: Fully-Loaded Hourly Cost
Work out the fully-loaded cost per hour of an employee — the true number employers should know before pricing services, quoting projects, or deciding whether to hire versus outsource.
Adjust the inputs and select Calculate for a full breakdown.
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Fully-loaded cost per hour |
|---|---|
| $104k / 2,080 hours ($50/hr) | $50.00 |
| $104k / 1,600 billable hours | $65.00 |
| $65k / 2,080 hours | $31.25 |
| $200k / 1,800 hours (senior) | $111.11 |
How This Calculator Works
Enter the total annual employee cost (salary + payroll tax + benefits + equipment + software + office + training) and the hours worked per year. The calculator divides one by the other to give the fully-loaded hourly cost. For service-business pricing, use billable hours (not total paid hours) as the denominator.
The Formula
Cost per Unit
Total Amount is the full cost or price, Quantity is the number of units it covers
Worked Example
A $104,000 fully-loaded annual cost (an $80,000 salary plus ~30% in payroll tax, benefits, and overhead) across 2,080 hours is $50/hour. But if only 1,600 hours are actually billable (after PTO, holidays, training, and admin), the cost-recovery rate jumps to $65/hour — the rate the business must bill just to break even on that employee.
Key Insight
The gap between an employee's wage and their fully-loaded cost is where service-business pricing goes wrong. An $80,000 salary feels like ~$38/hour (at 2,080 hours), but the fully-loaded cost is closer to $50/hour, and the break-even billing rate against actual billable hours is $65/hour — before any profit margin. Service businesses that price off the wage rather than the fully-loaded, billable-hour cost systematically underprice and erode margin. The standard markup on fully-loaded cost for a profitable service business is 1.5x to 3x.
Why fully-loaded cost is 25-40% above wages
Wage = base salary or hourly rate. Fully-loaded cost = wage + everything else employer pays. Difference substantial.
Components beyond wages. (1) PAYROLL TAX — employer's share of Social Security + Medicare 7.65% on first $168,600 (2024); FUTA + state unemployment ~0.6-3.0%; total ~8-11% of wages.
(2) BENEFITS — health insurance employer contribution averages $7,500/employee single coverage; family coverage higher. Retirement match typical 3-5% of salary. Life/disability/other benefits 1-2%.
(3) PAID TIME OFF — vacation, sick days, holidays = 10-25 days = 4-10% of wages depending on policy.
(4) TRAINING & DEVELOPMENT — varies by industry but 1-3% of salary typical.
(5) EQUIPMENT/SOFTWARE — laptop, phone, software licenses $2K-$10K per employee annually.
(6) OVERHEAD — rent allocation, utilities, IT support, HR support. $5K-$20K per employee depending on industry.
Total. $80K salary employee with $4K payroll tax + $10K benefits + $8K equipment + $10K overhead = $112K fully-loaded cost. $112K / 2,000 hours (after PTO) = $56/hour fully-loaded vs $40/hour wage.
Strategic uses of fully-loaded cost
Project bidding/billing. Service businesses must bill at multiple of fully-loaded cost to maintain profitability. Consulting typical: 2.5-3.5× fully-loaded cost.
$80/hour fully-loaded × 2.5× = $200/hour billing rate. Covers utilization gap (consultants billable 65-75% of time) plus profit margin.
Make vs buy decisions. Internal cost ($56/hour fully-loaded) vs contractor ($75/hour). Internal looks cheaper BUT: contractor flexible (no PTO, benefits, equipment); contractor scales up/down; no commitment costs. Realistic comparison includes flexibility value.
Layoff vs Reduce hours decisions. Layoff saves $112K. Reducing hours 25% saves only ~$40K (some costs fixed). For substantial cost reduction, layoff substantially more efficient — though obviously not optimal for affected employees.
Outsourcing decisions. Offshore developer at $30/hour all-in vs domestic at $80/hour all-in. Plus quality, communication, time zone costs. Calculation should include hidden costs beyond hourly rate.
Fully-loaded employee cost — illustrative breakdown
Reference fully-loaded cost components for $80K U.S. tech employee.
| Component | Annual cost | % of base |
|---|---|---|
| Base salary | $80,000 | 100% |
| Payroll tax (employer) | $6,400 | 8% |
| Health insurance | $9,000 | 11% |
| Retirement match (4%) | $3,200 | 4% |
| PTO (15 days = 6%) | $4,800 | 6% effective |
| Other benefits | $1,500 | 2% |
| Equipment/software | $5,000 | 6% |
| Office overhead (allocated) | $10,000 | 13% |
| FULLY-LOADED TOTAL | $119,900 | 150% |
Fully-loaded cost typically 1.4-1.6× base salary for typical U.S. corporate employee. Tech industry slightly higher (more equipment, larger office overhead). Healthcare lower (less office overhead). Calculation specific to industry and company.
Frequently Asked Questions
How is fully-loaded cost per hour calculated?
Divide total annual employee cost by hours worked. $104,000 across 2,080 hours is $50/hour. For service pricing, use billable hours (often 1,600 to 1,800) instead of total paid hours.
What goes into fully-loaded cost?
Salary + employer payroll tax (7.65% FICA + FUTA) + benefits (health, retirement match) + equipment + software licenses + office space allocation + training + recruiting amortization. Total typically 1.25x to 1.5x base salary; higher in benefit-rich or equipment-heavy roles.
Why use billable hours, not total hours?
Total paid hours (2,080) overstate productive capacity. PTO, holidays, training, meetings, and admin reduce actual billable time to ~1,600 to 1,800 hours. Pricing against 2,080 when only 1,700 are billable leaves you recovering cost on phantom hours — a common service-business margin leak.
What markup should a service business apply?
Bill at 1.5x to 3x the fully-loaded cost per billable hour, depending on the industry and value delivered. A $65/hour fully-loaded cost might bill at $100 to $195/hour. The markup covers non-billable overhead (sales, management, idle time) and profit.
How does this inform hire-vs-outsource?
Compare the fully-loaded hourly cost of an employee against a contractor or agency rate. Contractors cost more per hour but carry no benefits, equipment, or idle-time cost — for intermittent work, the higher hourly rate often beats a full-time hire's fully-loaded cost on under-utilized hours.
When is this calculator unreliable?
When cost components omitted (training, software licenses, overhead allocation commonly missed). Also unreliable when standard 2080 hours doesn't reflect actual hours (after PTO and holidays, typical effective working hours 1850-1900). For accurate analysis, use company-specific cost data and actual productive hours.
References & Authoritative Sources
- U.S. Bureau of Labor Statistics — Employment Cost Index — Employer Costs for Employee Compensation · consulted June 1, 2026 · Federal employee compensation data
- Society for Human Resource Management (SHRM) — Total Compensation Resources · consulted June 1, 2026 · Industry HR association
- WorldatWork — Total Rewards Cost Analysis · consulted June 1, 2026 · Professional compensation research
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Methodology & Review
Employee cost per hour equals (annual salary + benefits + payroll tax + training + overhead) / annual working hours. The calculator returns fully-loaded hourly cost. Differs from wage rate: fully-loaded cost typically 25-40% above base wage. Used for project bidding, billing rates, make-vs-buy decisions, and capacity planning. Standard assumption 2080 annual hours (40 hours × 52 weeks); adjust for PTO and holidays. RELIABILITY: Reliable when all cost components included. Less reliable when (a) some costs omitted (training, equipment, software licenses); (b) overhead allocation methodology varies; (c) working hours different from standard 2080.
Reviewed according to the CalcDomain Editorial Policy & Calculator Methodology. We document formulas, edge cases, sources, update dates, and correction paths for calculator pages.
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