Employee vs Independent Contractor Calculator
Compare the true cost of hiring an employee vs a 1099 contractor. Factor in taxes, benefits, and flexibility.
The Real Comparison
Comparing salary to contractor rate is misleading because it ignores the 25-45% burden on top of salary. A $65,000 employee with standard benefits costs approximately $85,000-95,000 total. A $50/hour contractor for 40 hours/week × 48 weeks costs $96,000 — nearly the same. The break-even contractor rate for a $65,000 employee is typically $42-47/hour.
Beyond Cost: Strategic Considerations
Choose employee when: The work is ongoing (12+ months), you need to control how work is done, and the role is core to your business. Choose contractor when: The work is project-based or variable, you need specialized skills for a limited time, or you want to scale up/down quickly. Note: the IRS has strict rules about worker classification — misclassifying an employee as a contractor carries significant penalties.
The gig economy has blurred the line between employees and contractors. California AB5 (and similar laws in other states) created a strict "ABC test" that makes it harder to classify workers as contractors. If the work is integral to your business, done on your premises, and the worker does not have an independent business, they are likely an employee under these newer laws.
