{
  "slug": "w2-employee-vs-1099-contractor-cost",
  "title": "W-2 Employee vs 1099 Contractor Cost Calculator",
  "heading": "W-2 Employee vs 1099 Contractor Cost Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/w2-employee-vs-1099-contractor-cost",
  "summary": "Compare the fully-loaded cost of hiring an employee against paying a contractor the same work.",
  "description": "A W-2 employee costs more than their base salary once you add payroll taxes, benefits, and overhead, while a 1099 contractor charges a higher hourly rate but requires none of that on your end. This tool compares the fully-loaded annual cost of an employee against a contractor's total billed cost for equivalent hours, so you can see which is actually cheaper for the work you need done.",
  "formula": "Employee Total = Salary + Payroll Tax + Benefits + Overhead. Contractor Total = Contractor Rate × Hours per Year.",
  "dateModified": "2026-09-06",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=w2-employee-vs-1099-contractor-cost",
  "inputs": [
    {
      "id": "salary",
      "label": "Employee base salary",
      "kind": "number",
      "hint": null,
      "default": 70000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "benefitsRate",
      "label": "Benefits + payroll tax load",
      "kind": "number",
      "hint": null,
      "default": 28,
      "unit": "%",
      "min": 0,
      "max": 60
    },
    {
      "id": "overheadAnnual",
      "label": "Overhead (equipment, office space)",
      "kind": "number",
      "hint": null,
      "default": 4000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "contractorRate",
      "label": "Contractor hourly rate",
      "kind": "number",
      "hint": null,
      "default": 65,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "hoursPerYear",
      "label": "Hours of work needed per year",
      "kind": "number",
      "hint": null,
      "default": 1800,
      "unit": null,
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "winner",
      "label": "Lower total cost option",
      "format": "raw",
      "hint": null,
      "primary": true
    },
    {
      "id": "employeeTotal",
      "label": "W-2 employee total cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "contractorTotal",
      "label": "1099 contractor total cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "diff",
      "label": "Annual difference",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "breakevenRate",
      "label": "Contractor rate that breaks even",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Employee base salary: 70000 $",
      "Benefits + payroll tax load: 28 %",
      "Overhead (equipment, office space): 4000 $",
      "Contractor hourly rate: 65 $",
      "Hours of work needed per year: 1800"
    ],
    "outputs": [
      "Lower total cost option: W-2 Employee",
      "W-2 employee total cost: $93,600",
      "1099 contractor total cost: $117,000",
      "Annual difference: $23,400",
      "Contractor rate that breaks even: $52.00"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter employee base salary ($).",
      "Enter benefits + payroll tax load (%).",
      "Enter overhead (equipment, office space) ($).",
      "Enter contractor hourly rate ($).",
      "Enter hours of work needed per year.",
      "Read your lower total cost option 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": 42000,
        "benefitsRate": 17,
        "overheadAnnual": 2500,
        "contractorRate": 40,
        "hoursPerYear": 1100
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "salary": 70000,
        "benefitsRate": 28,
        "overheadAnnual": 4000,
        "contractorRate": 65,
        "hoursPerYear": 1800
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "salary": 112000,
        "benefitsRate": 45,
        "overheadAnnual": 6500,
        "contractorRate": 105,
        "hoursPerYear": 2900
      }
    }
  ],
  "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": "Is misclassification a real risk here?",
      "a": "Yes — the IRS and state agencies look at control and independence, not just cost; don't choose contractor status purely to save money if the work relationship functions like employment."
    },
    {
      "q": "Does this include hiring and turnover cost?",
      "a": "No — employees carry recruiting, onboarding, and turnover costs not modeled here; contractors are typically faster to start and stop, which has real value beyond the raw hourly math."
    },
    {
      "q": "What benefits load is typical?",
      "a": "Payroll taxes alone run about 7.65% (FICA/Medicare), with health insurance, retirement match, and PTO commonly pushing total load to 25-35% of base salary."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/contractor-vs-employee-pay",
    "https://www.revenuelab.fyi/toolbox/in-house-vs-outsourced-payroll-cost"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — W-2 Employee vs 1099 Contractor Cost Calculator (https://www.revenuelab.fyi/toolbox/w2-employee-vs-1099-contractor-cost)"
}