Contractor vs Employee Cost Calculator
The sticker price lies: a contractor's hourly rate and an employee's salary look nothing alike once benefits, payroll taxes, and overhead enter the picture. This calculator lines up the full yearly cost of both side by side so you can see which one is actually cheaper.
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How to use this calculator
Enter the contractor's hourly rate, hours per week, and weeks per year, then the employee's salary, benefits burden percent, and any extra annual overhead. Results update instantly as you type.
Compare the two loaded annual totals: the contractor number is the sticker price you pay; the employee number adds benefits burden and overhead to the salary.
How it works
Contractor annual cost = hourly rate × hours per week × weeks per year. Example: $75/hr × 40 hrs × 52 weeks = $156,000.
Employee loaded cost = salary × (1 + benefits burden %) + extra overhead. Example: $100,000 × 1.30 = $130,000 — in this default case the employee is cheaper by $26,000 a year.
All figures are estimates. The calculator leaves out training costs, productivity differences, benefits admin time, and the legal risk of worker misclassification — use the verdict as a starting point, not a final decision.
Frequently asked questions
What counts as benefits burden?
Employer payroll taxes (Social Security, Medicare, unemployment), health insurance, retirement match, workers' comp, and PTO — often 25–40% of salary.
Are contractors always more expensive per hour?
Usually yes per hour, but you pay only for hours worked and skip benefits, recruiting, and management overhead.
What does this calculator leave out?
Productivity differences, training costs, legal and benefits admin time, and misclassification risk — treat the result as a starting estimate.
When is a contractor the better deal?
For short, specialized, or variable workloads — roughly when you need fewer than 1,000–1,500 hours a year of that skill.