Contractor vs Employee Cost Calculator

About this calculator

The true cost of a salaried employee extends well beyond their base salary to include employer payroll taxes (such as the employer's share of Social Security and Medicare in the US), benefits like health insurance and retirement matching, paid time off, and other overhead — collectively often called the burden rate, which commonly adds 1.25x to 1.4x on top of base pay. A contractor billed by the hour, by contrast, is paid only for hours worked, with no employer payroll tax or benefits obligation, but typically at a higher hourly rate to compensate for the lack of job security and benefits on the contractor's side.

Business owners, HR departments, and finance teams use this comparison when deciding how to staff a role — an ongoing, integral function is usually cheaper and more stable as an employee once overhead is included, while short-term or specialized project work is often cheaper as a contractor since there is no burden rate to carry between projects.

This calculator adds up the full employer cost of a salaried employee, including tax and benefit overhead, and compares it to the equivalent cost of hiring a contractor at an hourly rate, so you can see which option is genuinely cheaper for your business.