Contractor vs Employee Cost Calculator
See what a W-2 employee really costs once you add payroll taxes, benefits, and overhead, then compare it side by side with a 1099 contractor.
Compare your costs
Employer payroll taxes, benefits, insurance, equipment, and paid time off as a percentage of salary. 25 to 40 percent is typical.
Estimates only. Overhead and tax rates vary by location and business.
Email me this result
How it works
Three inputs reveal the real gap between hiring an employee and a contractor.
Enter the base salary
Start with the gross annual salary you would pay a W-2 employee before any extras.
Add your overhead rate
Layer on payroll taxes, benefits, insurance, equipment, and paid time off as a percentage of salary.
Compare the contractor
Enter what the contractor charges per year and see the true cost difference between the two.
Frequently Asked Questions
Common questions about contractor and employee costs.
The true cost is more than salary. It includes employer payroll taxes, health benefits, insurance, equipment, software, office space, and paid time off. These extras commonly add 25 to 40 percent on top of base pay, so a 60,000 salary can cost 75,000 to 84,000 per year.
Overhead covers everything you spend on an employee beyond their salary. Typical items are the employer share of Social Security and Medicare, unemployment taxes, health insurance, retirement contributions, equipment, and paid vacation. Adjust the overhead rate to match your own benefits and location.
Contractors fit short term projects, specialized skills, and variable workloads where you do not need full time hours. Employees make sense for ongoing core work and when you want long term control and loyalty. This calculator shows the cost side, but legal classification rules also matter.
Misclassification happens when you treat a real employee as a contractor to avoid taxes and benefits. It can lead to back taxes, penalties, and legal trouble. The right classification depends on how much control you have over the work, not just the cost, so check the rules in your country before deciding.
Hire smart, then bill smart
Invoice My Clients helps you send professional invoices, track payments, and manage contractors all in one place.
Now make the invoice, free and with no signup.
A professional PDF in about a minute. No account, no invoice limit.