How Much Does It Actually Cost To Hire A New Employee In America?
Despite fears of a recession in America, the US labor market created 372,000 new jobs in June 2022. While hiring new talent can seem like a daunting expense, how much does it actually cost to hire a new employee in America?
Tipalti has taken a look at salaries, taxes, and benefits around the country to find the average cost of employing new workers in every state.
So, how much would it cost you to hire a new employee?
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America's Top 10 Most Expensive States To Hire A New Employee
| Rank | State | Average Annual Salary | Social Security | Medicare | Health Insurance | Average Retirement Plan Contribution | Total Annual Cost |
| 1 | Alaska | $63,480 | $3,936 | $920 | $7,301 | $1,904 | $18,991 |
| 2 | New York | $70,460 | $4,369 | $1,022 | $6,493 | $2,114 | $18,946 |
| 3 | New Jersey | $67,120 | $4,161 | $973 | $5,518 | $2,014 | $18,647 |
| 4 | Washington | $68,740 | $4,262 | $997 | $6,305 | $2,062 | $18,349 |
| 5 | California | $68,510 | $4,248 | $993 | $5,931 | $2,055 | $18,330 |
| 6 | Massachusetts | $72,940 | $4,522 | $1,058 | $5,894 | $2,188 | $18,207 |
| 7 | Hawaii | $59,760 | $3,705 | $867 | $6,188 | $1,793 | $17,859 |
| 8 | Connecticut | $66,130 | $4,100 | $959 | $5,761 | $1,984 | $17,222 |
| 9 | Rhode Island | $62,120 | $3,851 | $901 | $5,795 | $1,864 | $17,124 |
| 10 | Maryland | $65,900 | $4,086 | $956 | $5,749 | $1,977 | $16,942 |
America’s Top 5 Least Expensive States To Hire New Employees
| Rank | State | Average Annual Salary | Social Security | Medicare | Health Insurance | Average Retirement Plan Contribution | Total Annual Cost |
| 1 | Mississippi | $42,700 | $2,647 | $619 | $4,995 | $1,281 | $12,273 |
| 2 | Alabama | $48,110 | $2,983 | $698 | $4,717 | $1,443 | $12,943 |
| 3 | Arkansas | $46,500 | $2,883 | $674 | $4,944 | $1,395 | $12,996 |
| 4 | Louisiana | $47,740 | $2,960 | $692 | $5,047 | $1,432 | $13,146 |
| 5 | Tennessee | $49,330 | $3,058 | $715 | $4,935 | $1,480 | $13,337 |
According to the research:
Alaska is the most expensive state to hire a new employee, costing $18,991 every year. Interestingly, the majority of this cost is health insurance, which accounts for over a third of employee expenses.
The state of New York is the second most expensive state to hire a new employee, costing $18,946 per year.
On the other end of the spectrum, employers in The Magnolia State of Mississippi, have the lowest annual cost per employee at $12,273 a year, as the state has the lowest average income, making federal taxes cheaper for employers.
Further findings from the study:
- Massachusetts is America's most expensive state for everything from social security and Medicare to federal unemployment tax and average retirement plan contributions; with employers contributing a combined $12,144 annually, per employee on these costs alone.
- New Jersey is America's most expensive state for disability insurance tax, with employers paying $940 annually per employee.
- Employers in Hawaii are paying America’s highest state unemployment tax of $1,422 annually per employee.
- Healthcare in Alaska is the most expensive in the country, with health insurance contributions from employers amounting to $7,301 annually. Interestingly, Alaska has a very wide margin compared to the rest of the country, with employers paying over $800 more than New York in second place.
Tipalti’s employee cost calculator is a useful tool to see the average cost of an employee in your state. See the calculator here.
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