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Contractor vs Employee Cost Calculator

See the true cost of hiring a contractor versus a full-time employee with a detailed side-by-side breakdown.

Enter Compensation Details

Base pay for either arrangement
Health, dental, 401k, PTO, etc. (employees only)
FICA (7.65%), FUTA, SUTA (employees only)
Laptop, tools, licenses (employees only)
Initial and ongoing training (employees only)
Desk space, utilities (employees only)
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Full-Time Employee

Base Salary—
Benefits—
Payroll Taxes—
Equipment / Software—
Training / Onboarding—
Office / Overhead—
Total Annual Cost—

Independent Contractor

Contract Rate—
Benefits$0
Payroll Taxes$0
Equipment / Software$0
Training / Onboarding$0
Office / Overhead$0
Total Annual Cost—

Pros and Cons

Employee

  • Full control over work schedule and methods
  • Builds long-term institutional knowledge
  • Consistent availability and dedication
  • Easier to protect intellectual property
  • Stronger team culture and loyalty
  • Higher total cost (benefits, taxes, overhead)
  • Harder to scale up or down quickly
  • Termination involves legal complexity
  • Must provide workspace and equipment
  • Ongoing management responsibility

Contractor

  • Lower overhead (no benefits, taxes, equipment)
  • Easy to scale up or down as needed
  • Access to specialized expertise on demand
  • No long-term commitment required
  • Contractor handles their own taxes
  • Less control over how work is performed
  • May work for competitors simultaneously
  • Higher hourly rate to compensate for no benefits
  • Risk of IRS misclassification penalties
  • Less availability and loyalty
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