# How much does an employer pay for a W2 Full Time Employee?

I’ve heard varying numbers and percentages thrown around — “anywhere between 20%-30% on top of the base salary” is something I’ve heard often. So, I decided to do some research to figure out how much (more) an employer pays for a W2 Full Time Employee (FTE).

First, I’m not a tax professional or an accountant. Please do not take any of this as “official”. This is simply research I’d done that I’ve chosen to share.

As I started researching, I realized that there are a few variables that contribute to the percentage:

• the number of employees the organization has,
• the base salary of the employee,
• the kind of work that the employees are engaged in (are your employees staying put in front of a computer, or are they repairing roofs?),
• the company’s vacation policy as well as the state’s paid sick leave policy, and,
• the extent to which the employer is willing to cover health insurance and benefits like 401K.

### Assumptions

For the sake of this research, I decided to make the following assumptions:

1. the business is in California, is conducting business in California, and it’s employees work in California,
2. this is a tax non-exempt business,
3. the business is engaged in a relatively “low risk” business for workers compensation insurance purposes[1],
4. the employee gets 3 days of paid sick leave[2],
5. this business covers \$5500 per W2 FTE per year on health insurance (also assuming here that no coverage is offered to dependents)[3], and,
6. benefits like 401K are not covered by this business.

### Findings

One of the biggest non-linear contributors to the additional percentage was health insurance (again, based on my assumption above). So, the higher the wage of the employee, the lower the additional percentage.

#### If your company employs more than 25 FTEs, and

• if your employee makes \$25,000 per year[4], you are likely to pay an additional \$8,911 in taxes, health insurance and mandated sick leave (which is 35.64% of \$25,000)
• if your employee makes \$150,000 per year, you are likely to pay an additional \$25,966 in taxes, health insurance and mandated sick leave (which is 17.31%).

#### If your company employs less than 25 FTEs, and if the average FTE income is less than \$50K and you have purchased coverage through SHOP[5], and

• if your employee makes \$25,000 per year[4], you are likely to pay an additional \$8,911 in taxes, health insurance and mandated sick leave (which is 24.64% of \$25,000)
• if your employee makes \$150,000 per year, you are likely to pay an additional \$25,966 in taxes, health insurance and mandated sick leave (which is 15.48%).

#### If you exclude health insurance, which you can only do if you employ less than 50 FTEs[6], you pay an additional 13.50% flat.

Here’s a rudimentary worksheet I created that shows how I arrived at these numbers: https://docs.google.com/spreadsheets/d/1FvLYdl3SeRs9hccsidPSu7UwJ8kTIDOkNB6XV4o5YB8/edit#gid=1150346394

### Conclusion

The “20%-30%” that gets floated around is more-or-less accurate. Assuming these claims were being made for employees who make between \$25K-\$50K per year, that percentage is definitely in the ballpark.

[2] California’s Paid Sick Leave Policy : http://www.dir.ca.gov/dlse/Paid_Sick_Leave.htm

[3] Health Insurance Costs and Coverage: http://kff.org/report-section/ehbs-2014-summary-of-findings/

[4] Minimum wage in San Francisco is \$12.25/hr, but I rounded this down to \$12/hr for this research http://sfgsa.org/index.aspx?page=411