What does a new hire really cost?
A wage is only part of what a hire costs. Payroll taxes, benefits, equipment, recruiting and the ramp-up weeks all belong in the number.
Loaded cost is pay plus the payroll taxes and benefits that ride on it — $52,000 at 7.65% taxes and 20% benefits runs about $5,530 a month, not the $4,333 the salary suggests. First-year cost adds recruiting, equipment and onboarding.
The math
How this works
How much does an employee really cost beyond salary?
Start with the wage, then add everything that travels with it. The employer share of payroll taxes comes off every paycheck you issue. Benefits are usually quoted as a share of pay and cover health premiums, a retirement match, workers' compensation and paid time off. Then come the costs that aren't recurring at all: recruiting, a laptop or a truck, tools, licenses, and the hours you and your team spend training someone. Together these push the real cost well above the figure on the offer letter, which is why the loaded multiplier on this page is worth reading before you commit to a salary.
How long does it take for a new hire to pay for itself?
Payback turns on two things: the loaded monthly cost and how fast the person reaches full output. During ramp-up you pay the full cost for part of the value, so the early months run at a loss by design. The payback point is where the value the role has produced so far catches up with everything it has cost, including the one-time spend. Shortening ramp-up with real onboarding moves that date more than shaving the salary does. If the monthly value never rises above the loaded monthly cost, there is no payback point, and this page will show you that plainly.
Should I hire an employee or a contractor?
The cost comparison is only half the decision. A contractor's rate looks higher per hour but carries no payroll taxes, benefits or paid time off from you, and you can scale the hours up and down with your workload. An employee costs more to carry and takes longer to ramp, but the capacity is dedicated, the knowledge stays in the business, and you can train toward the way you want the work done. The classification itself isn't a free choice; it follows from how the work is actually directed and performed, so check the rules that apply to you or ask your accountant first. Then run both options through this page with the same monthly value and see what each one nets you.
Questions people ask
What do I put in monthly value if the role doesn't sell anything?
Use the value of what the hire frees up. If an admin hire takes 60 hours a month off your plate and you would spend those hours on billable work at $80 an hour, that's $4,800 of monthly value. If the hire ends overtime or replaces subcontractor spend instead, use the amount you would stop paying.
What is a loaded multiplier?
It is the real cost of the hire divided by their base pay. A multiplier of 1.28 means every dollar of wage costs you $1.28 once taxes and benefits are counted. It's a quick way to sanity-check a budget: multiply any wage you're weighing by your own multiplier before you decide the role fits.
Why does ramp-up time matter so much?
Because you pay the full loaded cost from day one while receiving only part of the value until the person is up to speed. On a role worth $8,000 a month, a three-month ramp absorbs a real share of the first year's return. Shorter ramps come from written processes and a planned first month, not from paying more for someone more experienced.
Can I use this for a part-time hire?
Yes. Choose the part-time option and enter the annual total you expect to pay rather than an hourly rate. Keep the benefits percentage honest, too: if the role doesn't come with health coverage or paid time off, lower it to match what you actually provide.
Tools that pair with this one
Free financial education from Finli
Practical guides, webinars and new tools for small business owners. No sales pitch.
We never sell your information. Unsubscribe any time.
This is an estimate to help you think, not financial, tax or legal advice. Finli is not a bank and does not lend. Your own numbers, and your banker, beat any calculator.