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 your state's actual rates:

1. Federal FICA — 6.2% Social Security on the first $176,100 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 new-employer rate applied to its taxable wage base (the national average new-employer rate is 2.07%). We default to the new-employer rate — what a business actually pays before it has a claims history.
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

Tax constants are current for the 2026 tax year and were last reviewed on 2026-06-01. We update federal constants when the IRS publishes new figures and refresh state SUI rates and wage bases as each agency posts them, typically at year-end. Benefit and overhead defaults are starting points — change them to match your business, and the answer recomputes locally and instantly.