How we calculate the cost of a hire

Data sources

We use primary, government-published sources for every tax constant. Benefit defaults are drawn from the most recent national employer survey and are clearly labeled as editable assumptions, not fixed taxes.

How the engine works

The fully-loaded W-2 cost is the sum of five layers on top of base salary. Each is computed from the inputs you provide and the state planning defaults:

1. Federal FICA — 6.2% Social Security on the first $184,500 of wages, plus 1.45% Medicare on all wages.
2. FUTA — 0.6% net federal unemployment tax on the first $7,000 of wages.
3. State SUI / SUTA — your state's base new-employer rate or industry planning default applied to its taxable wage base (the average default is 2.06%). Surcharges, industry classifications, and claims history can change the assigned rate, so the calculator lets you enter the percentage on your state notice.
4. Workers' compensation — a premium per $100 of payroll, defaulted from typical office-role rates and fully editable.
5. Benefits & overhead — health insurance, a retirement match, other benefits, and overhead (equipment, software, space), each an editable assumption shown transparently in the breakdown.

The 1099 side is simpler: the contract amount plus an optional admin percentage, with no employer payroll taxes or benefits. We then solve for the breakeven contract rate — the 1099 rate at which a contractor costs exactly what the W-2 hire does — so the comparison is honest in both directions.

Assumptions & update cadence

The federal constants and state UI wage bases are current for the 2026 tax year and were last reviewed on 2026-07-10. State rate defaults are starting points because some states assign introductory rates by industry or add surcharges. Benefit and overhead defaults are starting points — change them to match your business, and the answer recomputes locally and instantly.