Employee Costs per Hour

When FP&A teams build business cases, one of the first questions asked is: “How much does this resource cost per hour?”

At first glance, the math seems simple: a $100K employee working 40 hours per week for 52 weeks equals about $50/hour.

But that answer is wrong—and dangerously misleading. Two overlooked factors make the real cost much higher: load and utilization.

1. Load: More Than Just Salary

Salary is only the starting point. The true cost of employing someone includes:

• Bonus (often 10–20% depending on level).

• Benefits (healthcare, retirement contributions, life/disability insurance).

• Employer taxes (Social Security, Medicare, unemployment).

• Overhead allocations (F&A rate)—the cost of facilities, IT, HR, and other support.

For example, take a $100K employee with:

Base salary = $100,000

Bonus (15%) = $15,000

Benefits (family plan, retirement, etc.) = $30,000

Employer taxes (~7.5%) = $7,500

Total Cost = $152,500

That “$100K employee” is already costing the company >$150K annually.

2. Utilization: Paid Hours vs. On-Task Hours

Companies often assume 2080 hours/year (40 hours × 52 weeks). But actual on-task hours are far fewer:

Paid hours (52 × 40) = 2,080 hours

Minus PTO & holidays (~30 days) = 240 hours

Minus training, offsites, etc. (~5 days) = 40 hours

In-office working hours1800

Minus breaks (half hour for lunch and two fifteen-minute breaks) = 225 hours

On-task hours = 1575

So instead of spreading $152,500 across 2080 hours, we’re spreading it across 1575 productive hours.

That equals $97/hour—nearly double the back-of-the-envelope $50/hour assumption.

Leadership Positions

The math compounds at senior levels.

• A $225K Senior Director with a 20% bonus and full benefits package can easily cost over $315K annually.

• Spread across ~1575 on-task hours, that’s $200/hour.

Every 10-hour steering committee costs ~$2,000 in leadership time alone.

Why This Matters for FP&A

For FP&A professionals, underestimating resource costs leads to:

• Underfunded projects—budgets that run dry midstream.

• Distorted ROI calculations—projects that look profitable but aren’t.

• Misallocated resources—leaders spending $200/hour time on $20/hour tasks.

The fix? Build standard rate cards by level or role that account for both load and utilization. This creates a realistic baseline for business cases, capacity planning, and resource allocation.

Key Takeaway

An employee’s cost per hour isn’t just salary divided by hours. When you account for benefits, taxes, overhead, and realistic utilization, an hour of work costs far more than most assume.

For FP&A, the discipline is clear: don’t let simple math mislead your strategy.