Labor cost calculator
An hour of work costs more than the wage: payroll taxes, state unemployment tax, workers' comp and any benefits come on top.
Example numbers, made up: The starting numbers are a made-up worker and week, and the state amounts aren't any real state's.
What an hour really costs
$17.65 an hour
That's 10.3% more than the $16.00 wage.
A shift
$105.90
6 hours at $17.65 an hour.
A year
$26,481
For 1,500 hours of work: $24,000 in wages and $2,481 on top.
How it's worked out
A year's pay = wage × hours a week × weeks a year. → $16.00 × 30 × 50 = $24,000
On top = each tax at its rate on the pay it covers, plus workers' comp and benefits. → Social Security $1,488 + Medicare $348 + FUTA $42 + SUTA $243 + workers' comp $360 = $2,481
An hour = (pay + what's on top) ÷ the year's hours. → $26,481 ÷ 1,500 = $17.65
How it's worked out
A year's pay = wage × hours a week × weeks a year. → $16.00 × 30 × 50 = $24,000
On top = each tax at its rate on the pay it covers, plus workers' comp and benefits. → Social Security $1,488 + Medicare $348 + FUTA $42 + SUTA $243 + workers' comp $360 = $2,481
An hour = (pay + what's on top) ÷ the year's hours. → $26,481 ÷ 1,500 = $17.65
Your state and your extras
Now: 2.7% state unemployment tax, $1.50 workers' comp for each $100 of pay, no benefits.
What taxes are in this?
Social Security, Medicare and unemployment taxes, paid on top of the wage.
The federal ones are the IRS's numbers for 2026, the same in every state, except FUTA in a few states (see below).
- Social Security: 6.2%
irs.gov ·2026 of each wage dollar, on the first $184,500 irs.gov ·2026 a worker earns in a year. The same comes out of the worker's pay. - Medicare: 1.45%
irs.gov ·2026 of every wage dollar, with no yearly limit. The same again comes out of the worker's pay. - FUTA (federal unemployment tax): 0.6%
irs.gov ·2026 on the first $7,000 irs.gov ·2026 you pay each worker in a year, once you get the full credit for paying your state's unemployment tax. Only the employer pays it.
Social Security, FUTA and your state's unemployment tax stop once a worker's pay for the year passes a limit. The calculator adds up the year's taxes and spreads them over the year's hours, so an hour's cost is an average over the year. In real life the unemployment taxes are owed on the first part of each worker's pay for the year, then stop.
If your state has borrowed from the federal government to pay unemployment benefits and not paid it back, your FUTA credit is smaller and FUTA costs more. See which states (dol.gov)(opens in a new tab)
Tips your workers report to you count as wages for Social Security and Medicare, so you pay your share on them too. This calculator counts only the wage you pay.
Workers with very high pay owe an extra Medicare tax on top. That one is the worker's alone: there's no employer share.
A week: labor as a share of sales
Owners plan staff as a share of sales, called labor cost %. Type a week's sales and your whole crew's hours. Each hour counts at the real cost of an hour from above, at straight time. Overtime in the crew's week would raise it.
Everyone's hours, added up.
Labor cost
29.4% of sales
$5,295 of crew cost on $18,000 of sales.
At the wage alone
26.7% of sales
What it would look like counting only the wage. Labor cost % counts payroll taxes and benefits too.
How it's worked out
Labor cost % = crew hours × the real cost of a straight-time hour ÷ the week's sales × 100. → 300 × $17.65 ÷ $18,000 × 100 = 29.4%
How it's worked out
Labor cost % = crew hours × the real cost of a straight-time hour ÷ the week's sales × 100. → 300 × $17.65 ÷ $18,000 × 100 = 29.4%
Learn the idea behind it
Lesson
Hiring your first crew(members-only)(included in your membership)
Go line by line through what a line cook's hour really costs, set a weekly labor budget, and staff your busiest shift.
Take the lesson
The numbers you type stay on this page and aren't sent anywhere. For learning, not financial advice.