Roughly twice what the payslip says. Here is where the rest comes from, why the ratio holds in almost every country even though the taxes do not, and how to work out your own figure.
About twice the wage.
Not one and a quarter, which is the figure you will find on the first page of every search. Not one and a half. Roughly double, once you count everything you spend and divide by the hours that actually produce something you can sell.
Where the usual answer goes wrong is not the adding up. It is the dividing. Nearly every published calculation divides by the hours you pay for. The honest one divides by the hours that turn into revenue, and those are around seventy per cent of the first number for most hands-on roles.
Everything below is written as a multiple of the base wage. Pay someone 1.00 an hour and the figures show what that hour really costs you. Your currency, your tax rates, same method.
This is the part that surprises people, and it is the reason a guide like this can be written at all.
Employer taxes differ enormously from country to country. So do holiday entitlements, pension rules, insurance requirements, notice periods and wages themselves. On paper, no two markets look alike.
And yet the ratio between what you pay a person and what they actually cost you tends to land in a narrow band — somewhere around two to one — almost everywhere, once you compare businesses at a similar stage of development.
What changes is the composition, not the total.
In a high-tax country, a large slice of the difference is employer contributions, and premises are relatively cheap. In a low-tax country, contributions are small but rent, equipment finance, transport, fuel and the cost of finding and keeping decent people eat the same space. Somewhere else again, wages are low but productive hours are lower still, because travel takes longer, materials arrive later and power is less reliable.
The money moves between columns. The bottom line barely moves.
Which means the useful thing to carry away from any guide, including this one, is never the percentage. It is the method. Copy someone else's percentages across a border and you will be wrong. Run their method on your own figures and you will be right.
Everything that leaves your account because this person exists.
The direct costs are the obvious ones, and most owners can list them without help: employer taxes and social contributions, pension, insurance, tools and protective equipment, workwear, a phone, a vehicle and its fuel if they use one, training courses and the certificates that expire.
Across a year these usually add somewhere between a quarter and a third on top of the wage bill. Call it 0.30 for every 1.00 paid. This is the number the standard calculators produce, and it is where they stop.
Then there is the part almost nobody counts.
Your premises. Your accountant. Your software. Your insurance policies. The person who answers the phone and chases invoices. The supervisor who does not personally produce anything. Your own hours spent quoting instead of working. Every one of those is real, and none of them appears on an invoice to a customer.
Divide your total annual overhead by the number of people who generate revenue — not by total headcount. Twelve staff with eight of them producing means those eight carry the whole building between them.
For a small business that share often lands near 0.38 for every 1.00 of wage. Heavier overhead or fewer producers pushes it higher.
Running total: 1.00 of wage is now 1.68 of annual cost.
A full-time year is roughly 2,080 paid hours. That figure is correct, useful, and completely irrelevant to what an hour of work costs you.
Take it apart. Statutory holiday and public holidays. Sick days. Training and inductions. Travel between sites. Setting up in the morning, packing down at night. Waiting — for materials, for weather, for a decision from a client who had not made one. Redoing work that went wrong first time.
None of that is somebody being lazy. It is what running a business looks like from the inside. But you pay for those hours and you cannot invoice them.
For most hands-on roles what is left is around seventy per cent of the paid year — 0.72. Contract definitions used in the real world put it near 1,550 hours. Research on office work puts the genuinely focused share lower again. A mobile team crossing a city four times a day can fall under 0.62; a workshop role with everything within reach can reach 0.80.
You do not need a system to find your own number. Take last month. Count the hours you paid. Count the hours that reached an invoice. Divide. Repeat for three months and you have something better than any published average, because it is yours.
The same employee, costed four ways:
What the payslip says 1.00 Wage plus direct costs, over paid hours 1.30 Wage plus direct costs, over productive hours 1.81 Everything, over productive hours 2.33
Most people quote against the first. The better-informed quote against the second. The fourth is what it costs.
Two businesses, one in a high-tax European country, one in a low-tax market elsewhere. Same trade, same size, ten people on the tools.
The European business pays 0.28 of the wage in employer contributions and 0.24 in overhead share. Total 1.52, divided by a productive share of 0.74, gives 2.05.
The other pays 0.06 in contributions — and 0.46 in overhead, because premises, vehicles, generators and equipment finance cost far more relative to wages. Total 1.52, divided by a productive share of 0.68 because journeys are longer, gives 2.24.
Wildly different tax systems. Practically the same answer. The owner who assumes low taxes mean cheap labour is the one who prices too low and cannot work out why the year ended flat.
Three decisions change the moment you have it.
Your quoting rate. What you charge has to clear the fully loaded figure before anything is profit. Most people set their price against the payslip and wonder where the year went.
Your hiring decisions. A wage increase of ten per cent is not a ten per cent increase in cost — with overhead and productive hours attached it is closer to twenty-three. That may still be worth paying. It is not worth paying by accident.
Your make-or-buy decisions. A subcontractor's price already contains their own version of this calculation, with their overhead and their lost hours baked in. Compared against your payslip figure they will always look expensive. Compared against your real cost, sometimes they are not — and that is the comparison that decides correctly.
Isn't the standard answer 1.25 to 1.4 times salary?
That is the standard answer, and within its own terms it is accurate: it covers wage plus taxes plus benefits, divided by paid hours. It answers the question "what does payroll cost me". It does not answer "what does an hour of work cost me", which is the question you need answered before you quote anything.
Does this apply to part-time and casual workers?
Yes, scaled to their hours. Casual and daily hires often show a higher productive share, because you only pay them on days there is work — but a lower one per day, since more of each day goes on arriving, being told what to do, and finding the tools.
Does it apply outside the trades?
The arithmetic does. An office role has different lost hours — meetings, interruptions, context switching, waiting on someone else's decision — but the same structure. Add everything, divide by what produces.
What if I don't know my overhead?
Then start with the direct costs and the productive hours, which gets you to 1.81. It is already far closer to the truth than 1.30, and you can add the overhead share once you have counted it.
Do this once by hand for one employee. It takes twenty minutes and it will change what you charge.
Doing it every month, for every person, and having it feed straight into your quotes is where it stops being reasonable by hand. The Employee ROI Calculator does exactly that — real cost per productive hour, margin before you sign, and live tracking while a job is still running. A free licence gives you the full application for one job every thirty days. No card.
See your real numbers →