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What does your first employee really cost?

For owners planning a first hire: this adds employer payroll taxes, federal and state unemployment tax, workers' comp and benefits to the wage. You get the full yearly cost and the true cost per hour actually worked.

Last updated October 28, 2026 · 2026 rates

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Cost of hiring by state

AlabamaAlaskaArizonaArkansasCaliforniaColoradoConnecticutDelawareDistrict of ColumbiaFloridaGeorgiaHawaiiIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNew HampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWest VirginiaWisconsinWyoming

Frequently asked questions

How much does it cost to hire your first employee?

Expect roughly 10–15% on top of wages for payroll taxes and workers' comp in most states, plus benefits. Our Florida example — $18/hour, 40 hours, 10 PTO days and $300/month health — costs about $44,500 a year, or $22.25 per hour actually worked.

What payroll taxes do employers pay in 2026?

Social Security 6.2% up to $184,500, Medicare 1.45%, federal unemployment (FUTA) 0.6% on the first $7,000, and state unemployment (SUTA) at a new-employer rate on a state wage base that ranges from $7,000 to over $70,000.

Is the FUTA rate higher in California for 2026?

Yes, almost certainly. California still owes a federal unemployment loan, so its FUTA credit is expected to be cut by 1.5%, making FUTA 2.1% on the first $7,000, an estimated $147 per employee instead of $42 (California EDD projection, not yet final). If the US Department of Labor refuses California's waiver of an extra 3.8% add-on, it would be 5.3%, about $413. The final figure comes after November 10, 2026.

Do I need workers' compensation insurance?

Most states require it once you have employees (thresholds vary; Texas lets most employers opt out). Cost depends heavily on job class: the 2024 Oregon study puts the all-industry median at $1.09 per $100 of payroll, with office work far lower.