A Wage Hike Costs More Than Just the Hourly Difference
When the minimum wage goes up, the hourly difference is only part of the story. Employer-paid payroll taxes — Social Security and Medicare (FICA), plus state and federal unemployment insurance — rise right along with wages, adding roughly 9% more on top of the raw wage increase. A few dollars per hour might not sound like much, but multiply that across several employees working close to full-time hours, and the annual impact on your payroll budget can be substantial. When planning your labor budget, it's safer to account for the wage increase plus the added payroll tax burden, not just the sticker-price raise.
How It's Calculated
| Step | Item | Detail |
|---|---|---|
| 1 | Hourly increase | New wage − old wage |
| 2 | Wage increase | Hourly increase × hours × employee count |
| 3 | Payroll tax increase | Wage increase × ~9% (employer burden) |
| 4 | Total increase | Wage increase + payroll tax increase, annual = ×12 |
Employer payroll tax burden varies slightly by state and industry, so this calculator uses an approximate 9% (FICA plus average state/federal unemployment insurance). For exact figures, check your state's unemployment insurance rate and current FICA requirements.
Frequently Asked Questions
Employer-paid Social Security, Medicare, and unemployment insurance rise proportionally with wages, so this calculator adds roughly 9% to reflect that.
Use your actual local rate — federal minimum is $7.25/hour, but many states and cities set higher minimums, some above $16/hour.
Yes, just enter their actual monthly hours. Some benefit and overtime rules can differ for part-time staff, so check your state's requirements.
※ Actual labor costs vary by state payroll tax rates and benefit obligations. This is an estimate only.