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Hourly Employee Cost Calculator

Convert a fully loaded employee cost into the true hourly cost of their productive time.

About Hourly Employee Cost Calculator

Salary is roughly three quarters of the real cost, and only about three quarters of paid time is productive. Those two factors compound, so the cost per productive hour is typically over twice the naive salary-divided-by-2080 figure. Agencies and consultancies that price against salary rather than cost per productive hour systematically underprice, and the gap only shows up at year end.

Formula

Hourly Employee Cost

Cost per productive hour = fully loaded cost ÷ (paid hours × productive share)

on-costs
Employer taxes, pension and benefits on top of salary
productive share
Proportion of paid time spent on billable or output work

Worked example

With the default values below, Hourly Employee Cost Calculator returns Cost per Productive Hour of $54.27. Change any input above and every figure here is recalculated in your browser.

Inputs used

Gross annual salaryminimum 0
55,000
Employer taxes, pension and benefitsaccepts 0–100 %
26 %
Paid leave and public holidaysaccepts 0–60 days
33 days
Contracted hours per dayaccepts 1–16 h
7.5 h
Share of paid time that is productiveaccepts 0–100 %
75 %

Results

Cost per Productive Hour
$54.27
Fully Loaded Annual Cost
$69,300.00
Cost per Paid Hour
$40.70
Productive Hours per Year
1,277 h
Minimum Billable Rate at a 40% Margin
$90.46

Step by step

  1. 1Values used
  2. 2Hourly Employee Cost
  3. 3Cost per Productive Hour= 54.27
  4. 4Fully Loaded Annual Cost= 69,300.00
  5. 5Cost per Paid Hour= 40.70
  6. 6Productive Hours per Year= 1,277 h
  7. 7Minimum Billable Rate at a 40% Margin= 90.46

Assumptions and limits

  • The result is derived only from the 5 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Hourly Employee Cost calculated?

Cost per productive hour = fully loaded cost ÷ (paid hours × productive share) Salary is roughly three quarters of the real cost, and only about three quarters of paid time is productive. Those two factors compound, so the cost per productive hour is typically over twice the naive salary-divided-by-2080 figure.

Why does Hourly Employee Cost matter?

Agencies and consultancies that price against salary rather than cost per productive hour systematically underprice, and the gap only shows up at year end.

What values do I need to enter?

This calculator takes 5 inputs: Gross annual salary, Employer taxes, pension and benefits, Paid leave and public holidays, Contracted hours per day, Share of paid time that is productive. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.

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