The True Cost of a New Hire
Salary is only 70% of what an employee really costs. Here’s where the rest goes — and a free calculator to do the math for you.
May 7, 2026
⏱️ 4 min read
✍️ BKZ Financial Services
70%
Salary is only this much of the real cost
+30%
Hidden in taxes, benefits, overhead
50
U.S. states pre-loaded in the calculator
Something I’ve noticed in most hiring conversations with clients: business owners usually answer with a salary when I ask what a new hire will cost.
That makes sense. Salary is the number on the offer letter, so it’s the number that sticks. But it’s usually only about 70% of the real number.
“The other 30% lives in line items that are easy to overlook — and that’s where hiring budgets quietly break.”
The real math
Let’s walk through a simple example: a $5,000/month salary ($60,000/year) for a full-time employee in Oregon, with standard benefits.
True annual cost
~$77,800
What you think
$5,000
per month
→
What it actually is
$6,485
per month
And if you bill that employee’s time to clients? You need to charge at least $54/hr just to earn a 45% margin. Pricing client work off the salary-based rate is how service businesses quietly lose money on every invoice.
Where the extra 30% comes from
Payroll taxes (~8-10%)
Social Security, Medicare, FUTA, and state unemployment (SUTA). Varies significantly by state — Oregon’s wage base is $56,700, Florida’s is just $7,000.
Benefits & insurance (~12-18%)
Health, dental, vision, life, 401(k) match, workers’ comp, and PTO. 15 days off on a $60K salary is effectively $3,500 in paid non-working time.
Tools & software (~5-7%)
Laptop, software licenses, phone stipend, workspace, training, recruiting costs, HR admin. Small individually, meaningful together.
Location matters more than you think
State SUTA rates alone can swing thousands of dollars. The same hire in two states often has meaningfully different total costs.
Why this hits small businesses hardest
Larger companies can absorb a miscalculated hire. Small businesses and early-stage startups often can’t. When every hire is a cash-flow decision, three mistakes show up over and over:
Budgeting salary, not total cost
You can afford the salary but not the hire.
Forgetting ramp-up time
New employees rarely produce full value in the first 90 days. You’re paying them in full from day one.
Mispricing client work
If you bill hourly but set rates based on salary, you’re losing margin on every invoice.
Why this calculator is useful
Most free hiring cost calculators online give you a single number: salary plus a rough markup. That’s not useful for real decisions, which have real variables — which state, which benefits, what kind of business model.
I built this one to handle those variables the way an advisor would.
Accurate for your state
All 50 U.S. states pre-loaded with current SUTA rates and wage bases. No generic estimates.
Customizable benefits
Standard benefits togglable + 10 custom rows for anything unique to your business.
See the leverage points
Toggle each benefit on and off to see exactly how much each one costs.
Know what to charge clients
Built-in break-even billable rate so you never lose money on invoices.
Side-by-side comparison
Stack two hires, roles, or locations against each other. Senior vs. juniors. Oregon vs. Texas.
Built for real decisions
Not a back-of-napkin estimate. A number confident enough to make a hire on.
The bottom line
Hiring is one of the most consequential decisions a growing business makes. A great hire compounds over years. A bad one drains cash, time, and morale.
This calculator won’t tell you who to hire, but it’ll make sure the hire you’re excited about is one you can actually afford.
Next Steps
Whatever you need next, we’ve got you covered.
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