Contractor vs Employee Calculator – True Cost
Compare the true cost of hiring a contractor vs employee, including taxes and benefits.
About This Calculator
Compare the true cost of hiring a contractor vs employee, including taxes and benefits. Use the calculator above for instant results.
Worked Examples
- FICA: $7,650 | Benefits: $25,000 | Overhead: $10,000
- True cost: $142,650/year
Answer: $142,650 true cost
- No benefits overhead | Agency markup: $22,500
- True cost: ~$172,500 vs employee equivalent: ~$214K
Answer: $172,500 vs $214K employee
- Employee: $113,200 total | Contractor: $126,500
- Contractor is $13K more but less commitment
Answer: Complex tradeoff
Who Uses This Calculator?
Compare true cost of contractor vs employee.
Build accurate hiring budgets.
Model headcount costs accurately.
Optimize workforce cost structure.
Common Mistakes to Avoid
❌ Forgetting benefits in employee cost
Benefits add 25-40% to base salary. Health insurance, 401k match, PTO, disability, workers comp — all real costs.
❌ Misclassifying workers
The IRS has strict rules on employee vs contractor classification. Misclassification = back taxes, penalties, and legal risk.
Frequently Asked Questions
Employee vs contractor cost comparison?
Employee: salary + 40-45% overhead = true cost. Contractor: usually cheaper short-term, but more expensive hourly.
When to hire employee vs contractor?
Contractor: short-term, specialized, uncertain need. Employee: ongoing core work, training investment, IP protection needed.
1099 vs W-2?
1099: contractor — you don't withhold taxes. W-2: employee — you withhold and match taxes.