Employee Cost Calculator

What an employee really costs the company: the gross pay plus employer contributions and the costs of the role itself.

Currency and number format for

Real cost a year

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Real cost a year—

For every 1 of gross—

Employer contributions—

Cost a month—

Cost per hour worked—

On top of the gross—

How this was worked out

The formula

total cost = gross + gross × contributions + costs of the role

Where it comes from

The gross figure in the contract is only the part the employee sees. On top go the employer contributions, a percentage of the gross that varies enormously between countries, and the costs of the role: equipment, licences, training, insurance and space. The sum is what that person's work has to cover.

How to work it out by hand

Start from the gross annual salary
Work out the employer contributions as a percentage of the gross
Add the annual costs of the role
Divide by the hours actually worked to get the cost per hour

What is worth knowing

The number most used in budgeting is the multiplier: how many times the gross the employee ends up costing. With contributions at 32 % and 3,000 of role costs on a gross of 30,000, the multiplier is 1.42. And the hourly cost has to be worked out on hours actually worked, not on the hours in the year: holidays and public holidays are paid but not worked, so subtracting them makes each useful hour dearer without changing the total cost at all.

Frequently asked questions

What percentage should I use for employer contributions?

It depends on the country and the type of contract, which is why it is a field and not a constant: across the EU it usually sits between 20 % and 35 %, and in Latin America the range is wider still. Check the official figure for your country.

What counts as costs of the role?

Computer equipment, software licences, training, insurance, workwear, allowances and the share of office space. Everything you would stop paying if the role did not exist.

Why is the hourly cost so high?

Because it is spread over the hours actually worked. Holidays and public holidays come out of the 52 weeks, so the useful hours are far fewer than the calendar suggests.

Can I use it to set my freelance rate?

As a reference, yes: it is the cost the company avoids by hiring you per project. To set the rate itself use the freelance rate calculator, which also strips out the hours you never bill.