Employee cost calculator for agencies
Calculate the true fully-loaded cost of an agency employee. See how salary, payroll taxes, benefits, overhead, and software add up to your real per-hour cost.
Salary & Taxes
US: 7.65% FICA plus FUTA, SUTA and workers comp
Benefits & Overhead
Health, dental, retirement match, PTO buyout
Office, equipment, admin, management time
Use last year's timesheets; 2,080 is the full-time maximum
True Employee Cost
Fully Loaded Annual Cost
$104,150
1.39x base salary
Monthly
$8,679
Per Billable Hour
$69.43
Next step: Divide the fully loaded hourly cost by (1 - target margin) to get a billable rate. At a 50% margin, that is twice the hourly cost.
How employee cost is calculated
- Employer taxes = base salary x employer tax rate.
- True annual cost = salary + employer taxes + benefits + overhead + software.
- Monthly cost = true annual cost / 12.
- Fully loaded hourly cost = true annual cost / billable hours per year.
- Cost multiplier = true annual cost / base salary.
Worked example
With the defaults, a $75,000 salary at a 9% employer tax rate adds $6,750. Add $8,000 of benefits, $12,000 of overhead and $2,400 of software for a true annual cost of $104,150, or $8,679 a month. Over 1,500 billable hours that is $69.43 per billable hour, and the employee costs 1.39 times their salary.
How to read the result
The hourly figure is your cost floor for this person's time. To set a selling rate with a target margin, divide by (1 - margin): for a 50% margin, $69.43 / 0.5 = $138.87 an hour. Billable hours have the biggest effect. At 1,200 billable hours instead of 1,500, the same person costs $86.79 an hour.
How to use this calculator
Start with the base salary you pay or plan to pay. Then add your employer tax rate. In the US that is 7.65% FICA plus federal and state unemployment tax and workers comp; ask your payroll provider for your actual rate. Benefits are what you pay for health insurance, retirement match and similar. Overhead covers the share of rent, equipment, admin and management time attributable to that seat.
The key number is billable hours per year. A full-time employee has about 2,080 paid hours (40 x 52), but vacation, holidays, sick days, internal meetings, training and business development all come out of that. Use the billable hours from last year's timesheets, not the theoretical maximum, or the loaded rate will understate real cost.
The output shows your total annual cost, monthly cost, and fully-loaded cost per billable hour. That last number is the floor for pricing any engagement this person works on. Bill below it and you're losing money on delivery even before overhead.
What to do with the results
- Check your billable rates. Divide fully loaded cost by (1 - target margin). A rate of 2x loaded cost gives a 50% margin on the hours you bill.
- Audit project profitability. Compare cost-per-hour to what you're actually realizing on current engagements. Losses are often invisible without this number.
- Price new hires before you make them. Calculate the loaded cost of a prospective hire and model how much additional revenue they need to bring in at your target margin.
- Plan raises and promotions. With the defaults, a 10% raise adds $7,500 of salary and $675 of employer tax, raising true cost by 7.8%, because benefits, overhead and software do not change.
Frequently asked questions
What is the true cost of an employee?
True cost (also called fully loaded cost) is everything an employer spends on an employee, not just base salary: payroll taxes (in the US, FICA plus federal and state unemployment tax and workers comp), benefits (health, dental, retirement match), overhead (office, equipment, management time) and software. With the calculator defaults, true cost is 1.39 times salary.
How do I calculate a fully-loaded hourly rate?
Divide total annual cost by annual billable hours. If an employee costs $105,000 all-in and bills 1,500 hours a year, their fully loaded cost is $70 an hour. Your billable rate has to exceed this by enough to leave margin after account management, rework and scope creep.
What counts as overhead per employee?
Their share of rent and utilities, equipment (laptop, monitor), admin and finance support, management time, training and recruitment costs spread over their tenure. Work it out by dividing your annual overhead by headcount; the agency overhead calculator does this per billable employee.
Why is my true cost so much higher than salary?
Because salary is only one line. In the default example, salary is $75,000 of a $104,150 total: taxes, benefits, overhead and software add the other $29,150. In the US, employer FICA alone is 7.65% of wages (6.2% Social Security and 1.45% Medicare). Leaving these out is the quickest way to price work below cost.
Should I use fully-loaded cost when pricing projects?
Yes. Use fully loaded hourly cost as your floor, not base salary / 2,080. Then divide by (1 - target margin) to get a billable rate: at $69.43 an hour and a 50% margin, that is $138.87.
See where your team time is actually going
On AgencyPro Pro, your team logs time on each client request, and timesheets show billable hours by person. Plus adds profitability reports by client and service.