Employee True Cost Calculator

When you hire someone for your practice, the wage is only part of the cost. Payroll taxes, insurance, benefits and paid time off add a lot. Knowing the true cost helps you set budgets, price services and decide whether a new hire will pay for itself.

What this calculator does

Enter the employee's annual wages, state unemployment tax, workers' comp rate, your share of health insurance, retirement match, other costs, paid hours per year and paid hours off. The calculator shows:

• the total yearly cost,
• cost as a multiple of wages,
• the employer's payroll taxes,
• benefits and match, and
• the cost per hour actually worked.

The formula in plain English

Employer payroll taxes = 6.2% Social Security on wages up to $184,500 + 1.45% Medicare on all wages + 0.6% federal unemployment on the first $7,000 + state unemployment + workers' comp rate × wages.

Benefits = health insurance + retirement match % × wages.

Total cost = wages + payroll taxes + benefits + other costs.

Hours worked = paid hours − paid time off.

Cost per hour worked = total cost ÷ hours worked.

A worked example

Dr. Lewis is hiring a medical assistant at $52,000 a year. State unemployment is about $400, workers' comp is 0.8%, her share of health insurance is $7,500, the retirement match is 3%, and other costs are $1,500. The assistant is paid for 2,080 hours with 120 hours of PTO and holidays.

• Payroll taxes: about $4,840.
• Benefits and match: about $9,060.
• Total cost: about $67,400, or 1.3× wages.
• Hours worked: 1,960.
• Cost per hour worked: about $34.39, compared with a $25 wage.

To pay for this hire, the assistant's work needs to bring in or save at least $67,400 a year, for example by letting Dr. Lewis see more patients.

Why it matters at each career stage

If you're: Practice owner

Use this before every new hire and when setting raises. A $2-an-hour raise costs more than $4,000 a year once payroll taxes and match are included. Compare the total cost with the production or savings the role creates.

If you're: Employed

If you're considering buying or starting a practice, staff is usually the biggest overhead. Run this for each planned position to build a realistic budget.

Making hiring decisions

Know the break-even. How many extra visits or procedures does the role need to cover its cost? Use the practice breakeven calculator.

Consider part-time. Benefits costs often depend on hours. A part-time role may fit lower demand.

Value retention. Replacing an employee can cost a large share of a year's wages in recruiting, training and lost productivity. Modest raises and good working conditions often pay for themselves.

Benchmark staffing. Compare staff costs as a share of collections with typical ranges for your specialty.

Salaried and exempt staff

The same math applies to salaried employees like office managers or associate providers, but the "hours worked" number matters even more. A salaried manager working 45 hours a week costs less per hour than one working 40, while a provider with a lot of non-clinical time costs more per patient hour. For clinical staff, it can help to divide total cost by the patient-facing hours the role supports.

State differences

State unemployment rates and wage bases vary widely, and new employers usually start at a standard rate. Workers' comp depends on job type and your claims history. Some states and cities also require paid sick leave or have higher minimum wages. Check with your payroll provider for your exact rates.

Next, check your overall overhead, see how a hire affects practice breakeven, and read practice ownership numbers to know.