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How to calculate the true cost of an employee
The total cost of an employee is the gross salary plus employer payroll taxes plus benefits and other employment costs. Payroll taxes are set by law; benefits depend on what you offer, such as health insurance, retirement contributions, equipment and training.
Dividing the total by the salary gives the cost multiplier. A multiplier of 1.25 means each dollar or pound of salary costs the business 1.25 in total.
Employer payroll taxes in the US (2026)
Employers match the employee's FICA taxes: 6.2 % Social Security on wages up to $184,500 in 2026 and 1.45 % Medicare on all wages. The additional 0.9 % Medicare tax on high earners is paid by the employee only.
Federal unemployment tax (FUTA) is 6.0 % of the first $7,000 of wages; with the full credit for state unemployment taxes paid on time, the effective rate is 0.6 %, or $42 per employee a year. State unemployment tax (SUTA) rates and wage bases are set by each state and depend on the employer's history.
Employer costs in the UK (2026/27)
Employers pay Class 1 secondary National Insurance of 15 % on each employee's earnings above the secondary threshold of £5,000 a year. Eligible employers can reduce their total bill with the Employment Allowance.
Under automatic enrolment, employers contribute at least 3 % of qualifying earnings, the band between £6,240 and £50,270 a year, for eligible jobholders earning more than £10,000. Many employers pay more, or calculate contributions on full salary.
Legal basis and sources
- US: Social Security Administration, 2026 contribution and benefit base ($184,500); IRS Publication 15 (FICA, FUTA)
- US: Federal Unemployment Tax Act, 26 U.S.C. §§ 3301–3302 (6.0 % rate, credit for state taxes)
- UK: HMRC rates and thresholds for employers 2026 to 2027 (Class 1 secondary NIC)
- UK: DWP review of the automatic enrolment earnings trigger and qualifying earnings band for 2026/27; Pensions Act 2008