See what an employee really costs your business in 2026: wages plus employer payroll taxes, unemployment tax, workers’ comp, benefits and overhead, as a yearly total and a fully loaded hourly rate.
Defaults: 2026 Social Security wage base $184,500; FUTA 0.6% on the first $7,000 after the standard state credit; SUTA example uses a Texas new-employer rate (2.7% on $9,000). Replace with your state’s rate.
How it works
| Cost | 2026 rule used |
|---|---|
| Social Security (employer) | 6.2% of wages up to $184,500 |
| Medicare (employer) | 1.45% of all wages |
| Federal unemployment (FUTA) | 6.0% of the first $7,000, usually 0.6% after the state credit (max $42). Credit reduction states pay more. |
| State unemployment (SUTA) | Rate and wage base set by your state and your claims history |
| Workers’ compensation | Priced by job class; office roles cost far less than trades |
| Benefits and overhead | Health insurance, retirement match, equipment, software, training |
The fully loaded hourly cost divides the total by 2,080 hours (40 hours × 52 weeks). Paid time off means fewer productive hours, so your real cost per working hour is higher still. Read the guide: the true cost of hiring an employee.
Employee or contractor?
A 1099 contractor carries no employer payroll tax or benefits, but classification depends on how the work is controlled, not on preference. See our 1099 vs W-2 guide, and let our payroll management service run payroll and filings once you hire.
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