The Real Costs of An Hourly Employee


Currently, many companies pay their employees based on work hours. Using a free payroll calculator is one of the best and easiest ways to determine the real costs of an hourly employee. It will help you calculate all the details and make sure that all numbers add up.

All costs of an employee include many elements – gross wage and all employee-related expenses such as payroll taxes, insurance, meals, travels, equipment, etc. Of course, it all depends on the company’s regulations and whether it decides to pay for additional expenses. 

To calculate the real cost of an hourly employee you will need to calculate the labor cost formula and actual overhead rates. In the labor cost formula you should consider employee’s hourly wages, the hours they work in a week, and the weeks they work in a year. When it comes to overhead rates, you have to add each overhead cost together and divide it by the hours an employee worked per year.

And so, determining labor cost per hour is easy. All you have to do is add an employee’s gross wages to the total cost of other expenses. Next, you have to divide it by the number of hours your employee works each year. Now overhead – add overhead to it  divide it by the number of employees  add this number to the employee’s annual labor cost → divide it by the number of hours your employee will work in a year. What you receive is the real cost of an hourly employee.

This is an easy technique but it may be confusing if you’re doing it on your own.


Which Free Payroll Calculator Should You Use


Yet the best way to calculate the real costs of an hourly employee is to use a payroll calculator. It is a free and effective tool which can make your work easy, especially if you hire many people who are paid for the hours they work. Specifically, if everyone works for a different period of time. Take a look at the top 5 free payroll calculators and choose the one that you like the most!


1. TSheets Calculator

TSheets offers a practical guide on how to determine the real costs of your employees. If you need to fully understand the above process of calculating labor, overhead, and actual costs, you may want to take a look at TSheets. Also, the free payroll calculator actually walks you step by step through the process of calculating the exact employee costs, including all the expenses, overheads, etc.


2. Paycheck Manager

Paycheck Manager is a free payroll calculator which allows you to deduct the costs related to taxes so you don’t have to do it manually. This software is a payroll management system for small businesses. But it has many more features. So if you need a tool to professionally manage payroll and deduct costs, it’s worth to invest in it. It starts at 5 USD per month.



3. QuickBooks Paycheck Calculator

Quickbooks free payroll calculator is a very simple solution. It allows you to calculate paychecks for your hourly and salary employees. It has four parts including taxes, overtime, and commissions: pay information, additional pay, Federal Tax Information, and State Tax Information DE 4. If you need more, you can also use Quickbooks Payroll and Tax tools.



4. Payroll Calculator

If you’re looking for the simplest solution, this will be the perfect fit. It explains all the important information you should know after you move your cursor to the required information. It’s easy-to-use and intuitive.


5. PaycheckCITY

This free payroll calculator allows you to calculate various costs. PaycheckCITY allows you to determine different costs thanks to many calculators: Salary Calculator, Hourly Calculator, W4 Calculator, Gross Up Calculator, Bonus Pay Percent, Bonus Pay Aggregate,  401(k) Calculator, Dual Scenario Salary, Dual Scenario Hourly.

Want more? Check PaycheckCity custom calculators to keep payrolls in one platform.



5 + 1 = TimeCamp

If you really want to get detailed, perfect calculations and be able to predict future payroll, you might want to consider using something more. How about time tracking software? 

time tracking software for HR

And before you say “no!” take a look at the benefits you will gain from implementing such a tool in your organization:

  • First of all, when your employees track work hours, it allows you to gain insight into their work. You can see how they’re actually spending their time when doing their job. You can see the productive and unproductive activities.
  • TimeCamp allows you to gather all the data about your budget.
  • You can control the budget when it’s exceeded – you always see who is exceeding the budget and prevent any financial problems.
  • Turn time entries into invoices basing on estimated hourly rates.
  • No more manual timesheet filling – it’s a fantastic solution if your employees have to use spreadsheets to log their work hours. That means precise payroll management.



Register for free today and perfectly calculate payroll with TimeCamp! PS. We now have a GPS tracking feature 😉


If you combine free payroll calculator with TimeCamp, you will be surprised how easy it is to manage payroll and budget. You will be able to see where all the additional costs go. Also, you will help your employees in their work and eliminate the work overload.


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Kate Kurzawska

Author Kate Kurzawska

Marketing Assistant at TimeCamp. Freelance translator, proofreader, copywriter & content writer, software researcher.

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