Methodology

Overview

CostCrunch calculates the true employer cost of hiring an employee by summing all mandatory payroll taxes and insurance contributions on top of base salary. This page documents every data source and formula we use so you can verify our numbers independently.

All calculations use 2026 rates. Data is reviewed and updated annually in January–March after state agencies publish new-year figures.

The Core Formula

FICA Taxes (Federal)

FICA taxes are split equally between employer and employee. CostCrunch only calculates the employer's share.

FUTA (Federal Unemployment Tax)

The gross FUTA rate is 6.0%, but employers receive a 5.4% credit for paying state unemployment taxes on time, resulting in a net rate of 0.6% on the first $7,000 of wages per employee.

Source: IRS Form 940 Instructions (2026). States with unpaid federal loans may have reduced FUTA credit (not included in our base calculation).

SUTA (State Unemployment Tax)

SUTA rates vary significantly by state — both the rate and the taxable wage base. CostCrunch uses the "new employer rate" or the midpoint of the standard rate schedule, which is what most new businesses pay before they accumulate an experience rating.

Sources: Individual state workforce agencies (e.g., EDD for California, TWC for Texas). Data updated annually. See the States Hub for all 51 state rates.

Workers' Compensation Insurance

Workers' comp is mandatory in all states and is priced as a percentage of payroll. Rates vary by industry (higher for construction, lower for office work) and by claims experience. CostCrunch uses reference rates for a general office/clerical classification as a baseline figure — your actual rate will vary.

Sources: NCCI (National Council on Compensation Insurance) reference rates; individual state rating bureaus for monopolistic states (OH, ND, WA, WY).

State Disability Insurance & Paid Family Leave

Several states require employer contributions to state disability insurance (DI) or paid family leave (PFL) programs. These are included in our calculations where applicable.

Sources: Individual state disability and family leave agencies. Rates updated annually.

Limitations and Disclaimers

• ⚠ Benefits not included: Health insurance, 401(k) match, dental, vision, paid time off, and other voluntary benefits are not included in the base calculation. These typically add 20–40% to total compensation cost.
• ⚠ SUTA experience rating: New employer rates are used. Your actual SUTA rate will change over time based on your unemployment claims experience.
• ⚠ Workers' comp by industry: We use a general office rate. Construction, manufacturing, healthcare, and other higher-risk industries will pay significantly more.
• ⚠ Local taxes: Some cities and counties impose additional employer payroll taxes (e.g., San Francisco, Seattle). These are not included.
• ⚠ Not professional advice: CostCrunch provides estimates for planning purposes. Consult a CPA, HR professional, or payroll service for advice on your specific situation.

Update Schedule

Current data reflects 2026 tax year figures. Last updated: March 2026.