How this number is made
The cost of an employee is the salary plus payroll taxes, benefits, and the overhead you choose to assign. The burden percent is yours. Twenty to forty percent is a common planning range. It is not a statutory rate.
- Salary is cash wages, not the fully loaded number.
- Burden should include the employer’s FICA, unemployment, and the benefits you actually pay.
Formula
Cost = salary × (1 + burden).
Worked example
With the figures already in the form, cost per year is $100,000.
Questions
What burden should I use?
Add the percents you can name: about 7.65% employer FICA until the wage base, plus unemployment, plus health insurance as a percent of salary. If you cannot name them, do not pretend 25% is exact.
Does this include the desk and the software?
Only if you put them in the burden. Many people leave overhead out and then underprice the work.