1099 Contractor vs W-2 Employee Cost Calculator

Employers also pay their share of payroll taxes, benefits like health insurance and retirement matching, and overhead such as equipment, software, and office space. These add well beyond the base salary.

The employer share of FICA (Social Security and Medicare) is about 7.65 percent, which is the default. State unemployment and other taxes can add more depending on your location.

No. This is a cost estimate only. Employees offer continuity and control while contractors offer flexibility, and misclassifying a worker can carry penalties. Confirm classification rules with a professional.

The contractor pays their own taxes (including the roughly 15.3 percent self-employment tax), their own health insurance, equipment, and unpaid gaps between jobs. Their rate has to cover all of that plus their profit. A common multiple is 1.5x to 2x the equivalent salary.

Agency fees, interview time, and the ramp-up period can add up to 20 to 50 percent of first-year salary. These are one-time, non-recurring costs: add them mentally to the year-one W-2 cost for a fairer comparison.

The IRS and many states can reclassify the worker as an employee, which brings back payroll taxes, penalties, and interest. Use the behavioral control, financial control, and type-of-relationship tests to classify the role correctly.

When you need specialized skills for a defined period, when the workload is variable and unpredictable, when the specialty would leave a full-time employee underutilized, or when speed of hiring is critical.

When the work is core and ongoing, when you need direct control over how the work is done, when confidentiality and long-term loyalty are priorities, or when the workload justifies the fixed cost of benefits.