What Does a $45 an Hour Employee Actually Cost?
True cost per billable hour
$69.84
At 9% workers comp, 3% unemployment, 2% liability, $2 an hour of benefits and 6.5 billable hours in an 8 hour day.
How that number is worked out
These are the figures this page was built with and every line the calculator produces from them. Change anything above and all of it moves.
- Base hourly wage you pay45 $
- Workers comp rate9 %
- State and federal unemployment3 %
- General liability, as a payroll percent2 %
- Benefits, per hour2 $
- Productive hours out of every 86.5 hrs
True cost per billable hour$69.84
| Base wage | $45.00 /hr |
|---|---|
| FICA at 7.65% | $3.44 /hr |
| Workers comp at 9% | $4.05 /hr |
| Unemployment at 3% | $1.35 /hr |
| Liability at 2% | $0.90 /hr |
| Benefits | $2.00 /hr |
| Burdened cost, every paid hour | $56.74 /hr |
| Only 6.5 of 8 hours are billable | $69.84 /hrthis is what a billable hour actually costs you |
| Burden over base wage | 55.2% |
Billable hours in an 8 hour day compared
The productive hours field is the one everybody skips, and it moves the true cost more than any tax rate does.
| Billable hours in an 8 hour day | True cost per billable hour | Burden over base wage |
|---|---|---|
| 6 of 8 | $75.66 | 68.1% |
| 6.5 of 8 | $69.84 | 55.2% |
| 7 of 8 | $64.85 | 44.1% |
| 8 of 8 | $56.74 | 26.1% |
What else matters here
Forty five an hour costs $56.74 a paid hour and $69.84 a billable hour, 55.2 percent over the wage.
The $11.74 of burden on every paid hour is exactly the money people are trying to avoid when they pay a worker on a 1099 instead of putting them on payroll. It is also why classifying somebody as a contractor when they are working as an employee is treated seriously by both the IRS and the state labor department.
The tests turn on the reality of the relationship rather than what the paperwork says: who controls how and when the work is done, who supplies the tools and the vehicle, whether the worker carries their own insurance and license, whether they work for anyone else, and whether they can make or lose money on the job. Getting it wrong means back taxes, penalties, and a workers compensation problem the first time somebody is hurt, because an uninsured misclassified worker is a claim against you. A genuine subcontractor with a license, a policy and their own customers is a different thing entirely, and the way to stay on the right side of it is to check the state's own test rather than to copy what a competitor does.
What this calculator assumes
- FICA is fixed at 7.65 percent, the employer half of Social Security and Medicare.
- Workers comp rates are set per trade and per state and swing enormously. Roofing can run over 25 percent where office work is under 1. Use your own rate off your policy.
- The productive hours field is the one everybody skips and it is the one that decides whether the job makes money. Drive time, loading, fuel stops and cleanup are paid and unbilled.
Questions people ask
What does a $45 an hour employee really cost?
$56.74 per paid hour with burden, and $69.84 per billable hour at 6.5 productive hours in an 8 hour day.
Can I pay a worker on a 1099 to avoid the burden?
Only if they are genuinely in business for themselves. The tests look at control, tools, insurance, license and whether they work for others, and misclassification brings back taxes, penalties and an uninsured injury claim. Check your state's own test.
Why is workers comp set at 9 percent here?
Because it is a middle of the road number and the calculator has to open with something. Comp rates are set per trade and per state and they swing enormously, from under 1 percent for office work to over 25 percent for roofing. Put your own rate off your policy into the field.
The labor burden calculator takes any dimensions you like and hands back the same list.