Hong Life CalculatorsUnderstanding the labor cost calculator — concept and principle
This calculator estimates the full yearly cost of employing staff: wages with overtime, employer social insurance or payroll taxes, and benefits, plus the fully loaded cost per hour. Business owners and HR teams use it for budgeting and pricing.
How it is calculated
- Gross wages = employees × paid weeks × (regular hours × wage + overtime hours × wage × overtime multiplier)
- Employer contributions = gross wages × employer rate %
- Benefits = employees × other benefits per employee
- Total labor cost = wages + contributions + benefits
- Cost per hour worked = total cost ÷ (employees × weeks × (regular + overtime hours))
- Labor burden = (contributions + benefits) ÷ wages × 100
The default employer rate of 11.44% is the page's sum of Korean 2026 employer rates: pension 4.75%, health 3.595%, long-term care about 0.47%, employment 1.15%, industrial accident about 1.47% (average). In the US, employer FICA is 7.65% plus unemployment taxes.
The principle
The wage is only part of what a worker costs. Employers also pay their share of social insurance or payroll taxes, plus benefits such as meals, health plans and training. Dividing the total by the hours actually worked gives the fully loaded hourly cost, the figure to use when pricing work or comparing staff with contractors. Overtime raises cost faster than hours, because both Korea and the US require at least 1.5 times the regular rate for overtime hours.
Worked example
Defaults: wage 25 an hour, 40 regular and 2 overtime hours a week at 1.5×, 52 weeks, 4 employees, employer rate 11.44%, benefits 2,400 each.
- Weekly pay per person = 40 × 25 + 2 × 25 × 1.5 = 1,075; gross wages = 4 × 52 × 1,075 = $223,600.
- Contributions = 223,600 × 11.44% = $25,580.
- Benefits = 4 × 2,400 = $9,600.
- Total = $258,780 a year, $21,565 a month, $64,695 per employee.
- Hours worked = 4 × 52 × 42 = 8,736; cost per hour = $29.62.
- Labor burden = (25,580 + 9,600) ÷ 223,600 = 15.7%.
| Number of employees | Total labor cost per year |
|---|---|
| 1 | $64,695 |
| 2 | $129,390 |
| 3 | $194,085 |
| 4 | $258,780 |
| 5 | $323,475 |
| 6 | $388,170 |
| 8 | $517,560 |
How to read the result
The fully loaded hourly cost (29.62 against a 25 wage) is the minimum to recover per hour before overheads and profit. Not every paid hour is billable.
Common mistakes
- Budgeting with the wage only.
- Using a current rate when rates change each year.
- Forgetting paid holidays when entering paid weeks.
- Ignoring contribution ceilings, the Korean weekly holiday allowance and severance accrual, which this model leaves out.
Frequently asked questions
What is a fully loaded labor cost?
Wages plus employer contributions and benefits, divided by hours actually worked.
How much does overtime cost?
In Korea and the US at least 1.5 times the regular hourly wage for overtime hours.
Does the result include severance pay?
No. Korean severance accrual, often estimated at about one month's pay per year, is not modelled.
Sources: Ministry of Employment and Labor (Korea), "2026년도 산재보험료율" and 고용24 "고용보험 보험료" · Korea Labor Standards Act, Article 56; U.S. Fair Labor Standards Act · U.S. Social Security Administration, employer FICA rates (6.2% + 1.45%)