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Contractor vs Employee Cost

Compare what a contractor costs against hiring a worker.

About Contractor vs Employee Cost

Comparing a contractor's actual booked hours against an employee's salaried burden reveals which engagement costs less for the same workload. The hourly contractor rate looks high until benefits and payroll taxes raise employee cost, so this trade-off is where real staffing money is won.

Formula

Contractor vs Employee Cost

Contractor annual = rate x hours x weeks; employee annual = salary x (1 + burden)

burden
Benefits and employer taxes added to salary

Worked example

With the default values below, Contractor vs Employee Cost returns Annual Contractor Cost of $117,000.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Contractor rate per hourminimum 0
75
Contractor hours per weekminimum 0
30
Employee annual salaryminimum 0
85,000
Benefits and taxes on employeeaccepts 0–100 %
25 %
Weeks per yearminimum 1
52

Results

Annual Contractor Cost
$117,000.00
Annual Employee Cost
$106,250.00
Cheaper Option
Employee is cheaper

Step by step

  1. 1Values used
  2. 2Contractor vs Employee Cost
  3. 3Annual Contractor Cost= 117,000.00
  4. 4Annual Employee Cost= 106,250.00
  5. 5Cheaper Option= Employee is cheaper

Assumptions and limits

  • The result is derived only from the 5 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation or fees or charges into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

How is Contractor vs Employee Cost calculated?

Contractor annual = rate x hours x weeks; employee annual = salary x (1 + burden) Comparing a contractor's actual booked hours against an employee's salaried burden reveals which engagement costs less for the same workload.

Why does Contractor vs Employee Cost matter?

The hourly contractor rate looks high until benefits and payroll taxes raise employee cost, so this trade-off is where real staffing money is won.

What values do I need to enter?

This calculator takes 5 inputs: Contractor rate per hour, Contractor hours per week, Employee annual salary, Benefits and taxes on employee, Weeks per year. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.

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