Free Tools /Cost
True Hourly Cost Calculator
Calculate an employee's real fully-loaded hourly cost, including real working hours, payroll tax, benefits, and overhead, with a full breakdown of where the cost comes from.
- Free, no signup
- Runs in your browser
- Nothing stored
true cost per hour
How this tool works
Starts from actual working hours, not 2,080
The naive salary ÷ 2080 calculation assumes 52 paid weeks of work. This calculator subtracts real PTO, holidays, and sick days first, since a fully-loaded cost has to be recovered across fewer actual working hours.
Adds the real overhead employers carry
Payroll taxes, benefits, and general overhead (equipment, software, office space, management time) are rarely visible on a payslip but are real cash costs of employing someone.
Shows the breakdown, not just the final number
See exactly how much of the true hourly cost comes from base pay versus taxes versus benefits versus overhead, useful for understanding where automation actually recovers value.
Frequently asked questions
Why is my "true" hourly cost so much higher than salary ÷ 2080?
Two compounding effects: the denominator shrinks (real paid working hours are fewer than 2,080 once PTO and holidays are subtracted), and the numerator grows (payroll taxes, benefits, and overhead add real cost on top of salary). Both push the true hourly figure meaningfully above the naive calculation.
What is a typical overhead percentage to use?
A common range is 15-30% of base salary for equipment, software licenses, office space allocation, and management/HR time, higher for smaller companies without economies of scale, lower for larger ones. If you do not have a precise figure, 20% is a reasonable default starting point.
Why does this matter for an ROI calculation?
Automation ROI calculations that use raw salary ÷ 2080 as the "cost of manual work" systematically understate the real savings, since they ignore taxes, benefits, and overhead that also scale with hours worked. Using the true hourly cost gives an honest, defensible ROI figure.
Does this apply to contractors the same way?
No, contractors are typically paid a flat rate that already reflects their business overhead; do not add employer payroll tax or benefits on top of a contractor rate, that double-counts costs the contractor already bears themselves.
What payroll tax rate should I use?
This varies significantly by country and, in the US, by state. A commonly cited US employer-side estimate is roughly 7.65% for FICA plus unemployment insurance, but confirm your actual rate with payroll or an accountant rather than assuming a generic figure for a compliance-sensitive calculation.
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