When a candidate asks for a $120,000 salary, the actual cost to your company is between $150,000 and $175,000 per year. Here's why — and how to budget for it.
The Full Stack of Employee Costs
1. Base Salary
The foundation. Everything else is calculated on top of this.
2. Employer Payroll Taxes (7.65–8.5%)
- FICA: 6.2% Social Security (capped at $168,600 in 2024) + 1.45% Medicare (no cap)
- FUTA: 0.6% on first $7,000 of wages ≈ $42/employee annually
- SUTA: Varies by state and experience rating, average ~2.7% on first $7,000–$56,500
At $120k salary: payroll taxes ≈ $9,640
3. Health Insurance (Largest Variable)
According to the 2024 Kaiser Family Foundation survey: - Single employee coverage: $8,435/year employer share on average - Family coverage: $17,393/year employer share on average
At a startup offering single coverage to all employees: +$8,435 per employee
4. Retirement Benefits
- 4% 401(k) match on $120k salary = $4,800/year
- Some companies offer Safe Harbor plans (3% non-elective) = $3,600/year
5. Other Benefits
- Life and disability insurance: $300–$800/year
- FSA/HSA employer contribution: $500–$1,500/year
- Learning & development budget: $500–$3,000/year
- Stock options or RSUs: highly variable
The Full Math
| Component | Amount |
|---|---|
| Base salary | $120,000 |
| Payroll taxes | $9,640 |
| Health insurance (single) | $8,435 |
| 401(k) match (4%) | $4,800 |
| Other benefits | $1,000 |
| Total (before bonus) | $143,875 |
Multiplier: 1.20x before bonus, 1.30–1.35x with 10–15% bonus.
Use the Employee Cost Calculator to model your specific numbers.