{
  "slug": "agency-freelancer-vs-hire",
  "title": "Freelancer vs Full-Time Hire Cost Calculator",
  "heading": "Freelancer vs Employee Cost Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/agency-freelancer-vs-hire",
  "summary": "Compare the annual all-in cost of a contractor against a salaried delivery hire.",
  "description": "A $70/hr contractor looks expensive next to a $52/hr employee until you add payroll tax, benefits, PTO, equipment, software seats, and the recruiting cost amortised over expected tenure. This calculator loads both sides properly and shows the break-even hours per year — the volume of work above which the employee becomes the cheaper option. Below that threshold you're paying full-time overhead for part-time demand. The employee side also accounts for the fact that a salaried person only bills a fraction of paid hours, which is the factor most freelance-versus-hire comparisons quietly skip.",
  "formula": "Employee all-in = salary × (1 + burden) + equipment + software + recruiting ÷ tenure. Employee cost/billable hr = all-in ÷ billable hours. Break-even hours = employee all-in ÷ contractor rate.",
  "dateModified": "2026-08-25",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=agency-freelancer-vs-hire",
  "inputs": [
    {
      "id": "salary",
      "label": "Employee base salary",
      "kind": "number",
      "hint": null,
      "default": 82000,
      "unit": "$/yr",
      "min": 0,
      "max": null
    },
    {
      "id": "burden",
      "label": "Payroll burden",
      "kind": "number",
      "hint": "Taxes, benefits, insurance",
      "default": 24,
      "unit": "%",
      "min": 0,
      "max": null
    },
    {
      "id": "equip",
      "label": "Equipment & software per year",
      "kind": "number",
      "hint": null,
      "default": 3600,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "recruit",
      "label": "Recruiting cost",
      "kind": "number",
      "hint": null,
      "default": 9000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "tenure",
      "label": "Expected tenure",
      "kind": "number",
      "hint": null,
      "default": 3,
      "unit": "yrs",
      "min": 0.5,
      "max": null
    },
    {
      "id": "billable",
      "label": "Billable hours the employee delivers",
      "kind": "number",
      "hint": null,
      "default": 1380,
      "unit": "hrs/yr",
      "min": 1,
      "max": null
    },
    {
      "id": "contractor",
      "label": "Contractor rate",
      "kind": "number",
      "hint": null,
      "default": 78,
      "unit": "$/hr",
      "min": 1,
      "max": null
    },
    {
      "id": "demand",
      "label": "Hours of work you actually have",
      "kind": "number",
      "hint": null,
      "default": 1200,
      "unit": "hrs/yr",
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "breakEven",
      "label": "Break-even hours per year",
      "format": "number",
      "hint": null,
      "primary": true
    },
    {
      "id": "allIn",
      "label": "Employee all-in annual cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "empPerHour",
      "label": "Employee cost per billable hour",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "contractorCost",
      "label": "Contractor cost at your demand",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "saving",
      "label": "Employee saving vs contractor (negative = contractor wins)",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Employee base salary: 82000 $/yr",
      "Payroll burden: 24 %",
      "Equipment & software per year: 3600 $",
      "Recruiting cost: 9000 $",
      "Expected tenure: 3 yrs",
      "Billable hours the employee delivers: 1380 hrs/yr",
      "Contractor rate: 78 $/hr",
      "Hours of work you actually have: 1200 hrs/yr"
    ],
    "outputs": [
      "Break-even hours per year: 1,388.21",
      "Employee all-in annual cost: $108,280.00",
      "Employee cost per billable hour: $78.46",
      "Contractor cost at your demand: $93,600.00",
      "Employee saving vs contractor (negative = contractor wins): -$14,680.00"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter employee base salary ($/yr).",
      "Enter payroll burden (%) — Taxes, benefits, insurance.",
      "Enter equipment & software per year ($).",
      "Enter recruiting cost ($).",
      "Enter expected tenure (yrs).",
      "Enter billable hours the employee delivers (hrs/yr).",
      "Enter contractor rate ($/hr).",
      "Enter hours of work you actually have (hrs/yr).",
      "Read your break-even hours per year on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "salary": 49000,
        "burden": 14,
        "equip": 2200,
        "recruit": 5500,
        "tenure": 1.7999999999999998,
        "billable": 820,
        "contractor": 47,
        "demand": 720
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "salary": 82000,
        "burden": 24,
        "equip": 3600,
        "recruit": 9000,
        "tenure": 3,
        "billable": 1380,
        "contractor": 78,
        "demand": 1200
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "salary": 131000,
        "burden": 38,
        "equip": 5800,
        "recruit": 14500,
        "tenure": 4.800000000000001,
        "billable": 2200,
        "contractor": 125,
        "demand": 1920
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why is the employee's cost per billable hour so much higher than their hourly salary?",
      "a": "Because roughly a quarter to a third of paid time isn't billable — meetings, admin, training, PTO — and burden adds another 20-30% on top of base. A $40/hr salary commonly lands near $60-70 per billable hour all-in."
    },
    {
      "q": "What non-cost factors should override this math?",
      "a": "Institutional knowledge, availability, client relationships, and IP ownership all favour employees, while flexibility and specialist skill favour contractors. If the contractor is the only person who knows how a core client's system works, the cheaper number is not the safer one."
    },
    {
      "q": "Should I include management time?",
      "a": "If it differs materially between the two, yes. Employees usually take more ongoing management but less re-onboarding; contractors need re-briefing every engagement. Add the difference as extra hours on whichever side carries it."
    },
    {
      "q": "How does classification risk factor in?",
      "a": "A long-term, full-time, exclusively-managed contractor can be reclassified as an employee in many jurisdictions, with back taxes and penalties attached. If your contractor looks like staff, the cost comparison should include that risk, not just the invoice."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/agency-capacity-plan",
    "https://www.revenuelab.fyi/toolbox/agency-blended-rate",
    "https://www.revenuelab.fyi/toolbox/agency-utilization-target"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Freelancer vs Full-Time Hire Cost Calculator (https://www.revenuelab.fyi/toolbox/agency-freelancer-vs-hire)"
}