When you hire an employee, the salary you offer is just the beginning of your actual costs. The true cost to employ someone—known as Cost to Company (CTC)—includes employer payroll taxes, health insurance, retirement contributions, equipment, training, and various overhead expenses. For many businesses, this total cost is 1.25× to 1.5× (or more) higher than the base salary. Understanding CTC is essential for accurate budgeting, pricing, and workforce planning.

Whether you're a business owner calculating hiring budgets, a manager justifying headcount requests, an HR professional benchmarking compensation, or a finance student studying labor economics, understanding the full cost of employment helps you make better decisions. This calculator breaks down every component of employee cost so you can see exactly where your money goes.

The gap between what an employee earns and what an employer pays creates confusion and sometimes friction. Employees see their salary; employers see a much larger number. By making CTC transparent, both sides can better understand the true economics of employment and have more informed conversations about compensation.

Our Employee CTC Calculator helps you input salary, bonus, employer taxes, benefits, retirement matching, and other costs to see your total annual, monthly, daily, and hourly cost per employee. The breakdown by component helps identify the biggest cost drivers and opportunities for optimization.

What is Cost to Company (CTC)?

Cost to Company (CTC) is the total amount an employer spends to employ one person for a year. It includes not just the employee's salary and bonus, but also all employer-side costs: payroll taxes, benefits, retirement contributions, equipment, training, and overhead. CTC is always higher than the employee's gross salary because it captures costs the employee never sees.

The Components of Employee CTC

The CTC Multiplier (Burden Rate)

The CTC multiplier (also called burden rate) shows how much higher total cost is compared to base salary. A 1.35× multiplier means CTC is 35% higher than the base salary—so a $100,000 salary actually costs $135,000.

Employer Payroll Taxes Explained

In the US, employers pay several payroll taxes on top of employee compensation:

• Social Security (FICA): 6.2% on wages up to $168,600 (2024)
• Medicare: 1.45% on all wages (no cap)
• Federal Unemployment (FUTA): 0.6% on first $7,000
• State Unemployment (SUTA): Varies by state (0.5%-6%+)

Combined, employer payroll taxes typically add 7.65%-15% or more on top of compensation.

Why CTC Matters for Business Decisions

• Hiring Budgets: Know the true cost before approving headcount
• Service Pricing: Set rates that cover fully-loaded labor costs
• Raise Calculations: A 10% raise increases CTC, not just salary
• Contractor vs. Employee: Compare apples-to-apples costs
• Workforce Planning: Project costs for team growth scenarios

Follow these step-by-step instructions to calculate your employee cost to company:

1. Enter Base Annual Salary: Input the employee's gross annual salary—the fixed compensation before any taxes or deductions. This is the foundation of all CTC calculations.
2. Enter Expected Annual Bonus: If the employee receives a target bonus or variable pay, enter the expected annual amount. Enter $0 if no bonus is expected.
3. Enter Employer Payroll Tax Rate: Input the combined employer payroll tax rate as a percentage. In the US, this is typically 7.65% (FICA) plus state unemployment taxes. Default suggestion: 10-12%.
4. Enter Annual Benefits Cost: Input the employer's annual cost for health insurance, dental, vision, life insurance, and other benefits. This is the employer portion only, not employee contributions.
5. Enter Retirement Match Percentage: If you offer 401(k) matching, enter the match as a percentage of salary (e.g., 4% means you contribute up to 4% of salary). Enter 0 if no retirement match.
6. Enter Other Annual Costs: Include equipment, software licenses, training, office space allocation, and any other per-employee overhead costs.
7. Set Working Days and Hours: Enter typical working days per year (usually 250-260) and hours per week (typically 40) to calculate daily and hourly rates.
8. Click "Calculate" and Review Results: The calculator displays:
   • Total Annual CTC
   • Monthly, daily, and hourly cost
   • Breakdown by component (salary, taxes, benefits, etc.)
   • CTC multiplier vs. base salary
   • Visual charts of cost distribution

Core CTC Formula

Component Calculations

Time-Based Cost Calculations

CTC Multiplier Formula

Full Example Calculation

• Budgeting Only for Salary: Many businesses budget only the salary figure when planning for new hires. This understates true cost by 25-50% and leads to budget overruns. Always use fully-loaded CTC for planning.
• Forgetting Employer Payroll Taxes: Employees see their portion of payroll taxes, but employers pay a matching amount that's often forgotten. FICA alone adds 7.65% on top of wages.
• Ignoring Benefits Cost Variations: Health insurance costs vary dramatically by plan type, location, and family status. A single employee might cost $6,000/year while family coverage could exceed $25,000.
• Overlooking Hidden Overhead: Equipment, software licenses, office space, training, and administrative support all add to per-employee costs. These are easy to forget but can total thousands per year.
• Using Wrong Tax Rates: Employer payroll tax rates vary by state and have wage caps. Using a national average for state-specific calculations can produce inaccurate results.
• Conflating CTC with Take-Home Pay: CTC is the employer's cost, not what the employee receives. Employees see gross salary minus their own taxes and deductions—very different from employer's total spend.
• Forgetting Cost Impact of Raises: A salary increase cascades through payroll taxes and retirement matching. A 5% raise might cost 6%+ in total CTC terms.

• Calculate CTC by Role Level: Different roles have different CTC multipliers based on equipment needs, travel, training, and benefit elections. Calculate role-specific multipliers for more accurate planning.
• Use CTC for Contractor Comparisons: When evaluating contractors vs. employees, convert both to equivalent hourly or annual costs. Contractors may look expensive per hour but have no benefits overhead.
• Build CTC into Service Pricing: For professional services firms, ensure billing rates cover fully-loaded CTC plus overhead and margin. Many businesses undercharge because they price against salary, not CTC.
• Track CTC Trends Over Time: Benefits costs typically increase faster than salaries. Monitor your CTC multiplier annually to catch cost creep before it impacts profitability.
• Model CTC Scenarios for Hiring Plans: When planning team growth, model different hiring scenarios with CTC to understand true budget requirements. Five new hires at $100K salary might really cost $700K.
• Consider Geographic Variations: Remote hiring in different states/countries affects CTC through tax rates, benefits costs, and local market salaries. A remote hire in a low-cost state may have lower total CTC.
• Review Benefits ROI Through CTC Lens: Expensive benefits increase CTC but may improve retention and productivity. Analyze whether benefits costs deliver proportionate value in hiring and retention.

These are general guidelines. Actual CTC varies by company, location, and benefit generosity.

• Simplified Payroll Taxes: This calculator applies a flat percentage for employer payroll taxes. In reality, taxes like Social Security have wage caps, and rates vary by state and jurisdiction.
• Average Benefits Assumption: Actual benefits costs depend on plan design, employee elections, and family status—factors not captured here.
• No Geographic Adjustment: Costs vary significantly by location. This tool uses your inputs without location-based adjustments.
• Static Snapshot: CTC components change over time with insurance renewals, tax law changes, and benefit modifications. Recalculate periodically with updated inputs.
• Educational Purpose Only: This calculator is for educational and planning purposes. Consult HR, payroll, or accounting professionals for actual employment cost calculations.

The information in this guide is based on established employment cost principles and authoritative sources:

• U.S. Bureau of Labor Statistics (BLS) - Employer costs for employee compensation: bls.gov
• Internal Revenue Service (IRS) - Employer payroll tax requirements: irs.gov
• U.S. Department of Labor (DOL) - Employee benefits and compensation: dol.gov
• U.S. Small Business Administration (SBA) - Hiring and employee costs: sba.gov