CostPrism
Business & HR · Updated June 2026

Payroll Cost Guide 2026: The True Cost of an Employee

Hiring a $60,000/year employee actually costs you $75,000–$84,000. Here's every tax, benefit, and overhead cost broken down — plus which payroll software gives you the best ROI.

Sources: IRS, BLS, SHRM, Kaiser Family Foundation Methodology
1.25–1.4×
True cost multiplier
8.15%
Mandatory FICA taxes
$6–25/mo
Per employee payroll cost

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True Cost of a $60,000 Employee (2026)

Every cost beyond base salary that an employer pays for a full-time employee earning $60,000/year.

Cost Component Annual Cost % of Salary
Base Salary $60,000 100%
Social Security (6.2%) $3,720 6.2%
Medicare (1.45%) $870 1.45%
FUTA + SUTA $1,050 ~1.75%
Health Insurance (employer share) $7,000 ~11.7%
Retirement Contribution (401k) $1,800 3%
Workers Compensation $900 ~1.5%
Payroll Processing $840 1.4%
Other (training, equipment, space) $2,400 4%
Total Employer Cost $78,580 ~131% of salary

Mandatory Payroll Taxes Employers Must Pay (2026)

These are federal and state taxes on top of the employee's salary that every employer must pay. There's no way to avoid them.

Tax Rate Wage Cap Annual Cost ($60K)
Social Security (OASDI) 6.2% $168,600 (2026) $3,720
Medicare (HI) 1.45% None $870
FUTA (Federal Unemployment) 0.6%* $7,000 $42
SUTA (State Unemployment) 1–6% $7K–$42K (varies) $189–$1,890
Workers Compensation 0.5–8%+ On all wages $300–$4,800

Payroll Software Comparison (2026)

Monthly cost for a 10-employee company running bi-weekly payroll. All include automatic tax filing in most plans.

Service Base Fee Per Employee 10 Emp. Annual
Gusto Core $40/mo +$6/employee $1,200
QuickBooks Payroll Core $45/mo +$6/employee $1,260
ADP Run (Essential) ~$60/mo +$4/employee $1,440
Paychex Flex (Essential) ~$39/mo +$5/employee $1,068
OnPay $40/mo +$6/employee $1,200
Wave Payroll $20/mo (tax filing states) / $6/mo (others) +$6/employee $960+
DIY (IRS Direct / spreadsheets) Free Free $0 + your time

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Gusto automates payroll taxes, W-2s, and direct deposit. Rated #1 for small businesses. Free setup, cancel anytime.

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Frequently Asked Questions

Payroll processing costs $20–$250/month for small businesses (1–10 employees), or $3–$12 per employee per payroll run. Full-service payroll (ADP, Paychex) costs $8–$25/employee/month. For 10 employees, expect $80–$250/month.

The total employer cost of an employee is typically 1.25–1.4x their base salary. For a $60,000/year salary, total cost is $75,000–$84,000. The difference covers FICA (7.65%), FUTA/SUTA unemployment taxes, health insurance, retirement contributions, workers comp, and overhead.

Employers must pay: Social Security (6.2% up to $168,600), Medicare (1.45%), FUTA federal unemployment (0.6% on first $7,000), and SUTA state unemployment (varies, typically 2.7% on first $7,000–$42,000). Total mandatory taxes: approximately 8.5–12% of gross wages.

For under 5 employees, payroll software like Gusto or QuickBooks Payroll ($45–$80/month base + per-employee fee) is usually most cost-effective. For 10+ employees, a full-service provider saves time and reduces compliance risk. The IRS charges penalties of $500–$5,000 for payroll tax errors.

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