The Real Cost of a New Hire: Don't Forget the Insurance

by: Cathy Mudd | November 4th, 2026

A new employee costs far more than their salary, and health insurance is the line most often left out of the budget. A $60,000 role can easily cost $75,000 to $88,000 a year. Here's how to calculate the real number before the offer goes out.

The Formula
{Total cost} = Wages + Payroll taxes + Insurance + Other benefits + One-time costs

Benefits make up almost 39% of total compensation for state and local government workers, according to the Bureau of Labor Statistics (June 2026); [see Technical Note].

Payroll Taxes
California employers pay roughly 8% of wages in payroll taxes: Social Security (6.2% up to $184,500), Medicare (1.45%), plus federal unemployment, state unemployment, and the Employment Training Tax on the first $7,000. State Disability Insurance is withheld from the employee, so it isn't an employer cost. Your payroll provider can confirm your exact rates.

Insurance: The Cost People Forget

Health insurance depends on who the employee covers, not on their salary. The KFF 2025 Employer Health Benefits Survey puts the average employer share at about $7,900 a year for single coverage and $20,100 for family coverage.

  • Budget at the family tier. You can't ask candidates about their family, so plan for the higher cost.
  • Check workers' comp and general liability. These are both tied to payroll.
  • Plan for renewals. Premiums usually rise every year.

Example: a $60,000 Office Hire in California

    The image shows a cost breakdown for single and family employee coverage, including salary, taxes, and total annual cost.
    The image shows a cost breakdown for single and family employee coverage, including salary, taxes, and total annual cost.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Don't Forget One-time Costs
    Recruiting, equipment, onboarding, and the months it takes a new hire to get fully up to speed all add to the first-year cost.

    Before You Approve a Position
    Budget 1.3 to 1.5 times salary, then confirm:

    • Salary, including expected overtime
    • Employer payroll taxes
    • Medical premium at the family tier
    • Dental, vision, life, and disability
    • Workers' comp and Liability rates
    • Retirement match and one-time costs

    Salary is what the employee sees. Total cost is what the business pays.

    Sources

    Have additional questions? Call us at (530) 934-5633 or email memberservices@gsrma.org. How can we help you?