Free tool
Contractor vs employee cost calculator
Enter an employee's wage and extra costs, and a contractor's hourly rate. See which costs less per productive hour and the rate where they break even.
Prefer to talk it through? Take the free books check or contact us.
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Free to use. Paste this where you want it to appear. It runs in the visitor's browser, so nothing they enter is sent to us, and the line under it links back to this page.
How it works
How it works
The employee's cost is wages plus a burden percent for employer taxes and insurance, plus benefits. The calculator divides that by productive hours, the hours left after paid time off and training, to get a cost per productive hour. That is the fair number to hold up against a contractor's hourly rate.
This only compares cost. Whether someone is an employee or a contractor depends on legal tests, so ask an employment attorney or your accountant.
FAQ
About this calculator
Is it cheaper to hire a contractor or an employee?
It depends on the rates and on how many hours are actually productive. Contractors cost more per hour but you do not pay payroll taxes, benefits or paid idle time. The calculator compares the cost per productive hour.
Can I choose to treat someone as a contractor?
Not freely. Whether a worker is an employee or an independent contractor turns on legal tests about control, independence and the relationship, set by federal and state law. New Jersey applies a strict test. Ask an employment attorney or your accountant.
What is the burden percent?
Everything added to wages for employer taxes, insurance and similar costs, as a percent of wages. The employee cost calculator shows how to work it out.
What is idle time?
Paid hours that are not productive, such as holidays, vacation, sick time and training. Contractors usually bill only for the hours they work.
Is anything saved?
No. The math runs in your browser and nothing you enter is sent to us.
Work out the burden with the employee cost calculator, check whether you must send a form with do I need to send a 1099?, or read the 1099 contractors checklist. More free tools: Cost per square foot calculator, Project quote calculator, Percentage calculator, or see all free tools.
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General information, not tax or legal advice. How we write and check our tools.
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