Free calculator: contractor vs. employee
Contractor vs. employee calculator
Compare the cash cost of a fully-loaded employee with the contractor hours you expect to purchase, instead of comparing salary with hourly rate alone.
Inputs and formula
- Employee cost = salary × (1 + benefits + payroll tax) + annual overhead.
- Contractor cost = monthly hours × hourly rate × (1 + fees) × 12.
- Break-even use is the monthly contractor hours at which modeled contractor cost equals employee cost.
Worked example
A $90,000 employee with 20% benefits, 7.65% payroll taxes, and $5,000 overhead costs about $119,885 annually. A contractor working 120 hours per month at $85 plus 5% fees costs about $128,520.
Planning estimate caveat
Cost is only one decision factor. Worker classification, continuity, intellectual property, availability, management time, and benefits quality may matter more than the modeled difference.
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