True cost
How much does it cost to hire your first employee?
Short answer: on a straightforward $20-an-hour, 40-hour W-2 hire, wages are $41,600 a year and official employer payroll taxes add $3,336.90 to $4,451.60 in states with a published new-employer unemployment rate, before workers’ comp, benefits, and tools. There is no single official U.S. total, because pay, state unemployment tax, and insurance all change. This page adds those layers up and points to the detailed guides rather than inventing a nationwide “average cost to hire.”
Key takeaways
- Wages are the largest line. $20 an hour at 40 hours is $41,600 over 2,080 hours. Official BLS Occupational Employment and Wage Statistics, May 2025 figures for some trades are higher or lower; see the trade pages and how much to pay a helper.
- Federal employer taxes on that wage are $3,224.40: $2,579.20 Social Security, $603.20 Medicare, and $42.00 net FUTA (IRS Publication 15, IRS Topic 751, IRS Topic 759 (Form 940/FUTA)).
- Official 2026 new-employer state unemployment tax on the same wage ranges from $112.50 (Nebraska) to $1,227.20 (Nevada) among states with a published rate in the U.S. DOL January 2026 Significant Provisions table (PDF). The state payroll-tax index lists every state and D.C.
On this page
Build your own total Prefills $20 an hour and 40 hours. Choose your state for the official unemployment wage base.
Open the calculatorThe cost stack, line by line
| Line on a $20/hour, 40-hour year | What we can source officially |
|---|---|
| Wages (2,080 hours) | $41,600.00 |
| Employer FICA | $3,182.40 |
| Net FUTA | $42.00 |
| State unemployment tax (published new-employer rates) | $112.50–$1,227.20 |
| Employer payroll taxes, combined | $3,336.90–$4,451.60 |
| Workers’ compensation | Quote; no national rate invented here |
| Health, retirement, paid time off | Optional; enter only what you will actually offer |
| Payroll software or a bookkeeper | Your vendor’s fee, not a made-up average |
| Recruiting, tools, safety gear, training | Shop-specific; not a payroll tax |
Add the wage, the official tax range for your state, and the insurance quote, and you have the number that matters for pricing jobs. A mid-four-thousand-dollar tax add-on on a $41,600 wage is roughly 8–11% of wages for taxes alone. Insurance can add more, especially in higher-rate classes. Benefits, if you offer them, add more still.
A labeled Indiana example, not a national average
When this site can complete the insurance line from an official advisory filing, it says so. On a $20-an-hour, 40-hour Indiana plumber, with typical new-employer SUTA of 2.50% on the first $9,500, the ICRB class 5183 minimum premium of $451, and the calculator’s default payroll-software estimate of $660, the annual true cost is $46,172.90, or $22.20 per paid hour. That worked example is documented on the calculator and the Indiana payroll-tax page. It is not a claim about what the hire costs in Texas, Florida, or any other state, and the software line is an estimate you should replace with your own fee.
What changes the total the most
- The wage and the hours. Overtime under the Fair Labor Standards Act is due at one and a half times the regular rate when it applies. A 20-hour schedule cuts wages and percentage taxes roughly in half, but minimum insurance premiums may not drop proportionally. See workers’ comp cost for a first employee.
- The state. Unemployment wage bases differ by tens of thousands of dollars. A few states also have official disability or paid-leave programs; those pages tell you to use the notice rather than a guessed rate.
- Classification. A true independent contractor is a different cost structure. Do not use a 1099 to avoid the W-2 stack if the person is your employee. See W-2 vs 1099 cost for trades and the classification guide.
Trade-specific pages apply official BLS wages to this same stack for electricians, HVAC, plumbers, and others. If you are still testing affordability against billable work, use can I afford a helper after you have a true-cost number.
Run the stack for your wage Change the hourly rate, hours, and state; add a workers’ comp quote when you have one.
Open the calculatorFrequently asked questions
How much does it cost to hire a first employee in 2026?
On a $20-an-hour, full-time W-2 example, wages are $41,600 and official employer payroll taxes add $3,336.90 to $4,451.60 in states with a published new-employer unemployment rate, before workers' comp and benefits. Your wage, state, and insurance quote change the total. There is no official nationwide average on this site.
What is the employer payroll-tax cost on $20 an hour?
Federal employer FICA plus net FUTA is $3,224.40 on $41,600 of wages. State unemployment tax is extra; official 2026 new-employer amounts on that wage range from $112.50 to $1,227.20 among states with a published rate.
Does that total include workers' comp?
No. Workers' comp is insurance and has no official national rate on this site. Add a quote, or, if you are in Indiana, use the verified ICRB advisory rates the calculator can prefill.
Figures on this page were checked against the linked official IRS, DOL, USCIS, ACF, and (where used) Indiana ICRB pages in November 2026. Examples are planning estimates, not a tax, legal, or insurance outcome. Confirm with your agencies, accountant, and carrier before you hire or classify a worker.