Rex says
Money math without the spreadsheet headache. Plug in your numbers and I'll show you exactly where the dollars land.
Try a scenario
Click to load — tweak from there.Inputs
Taxes, benefits, insurance
Result
Break-even hours per year
1,388
Employee all-in annual cost
$108,280
Employee cost per billable hour
$78
Contractor cost at your demand
$93,600
Employee saving vs contractor (negative = contractor wins)
-$14,680
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One click, a permanent link with your numbers baked in.
Got your number — what next?
Pick one, it takes 20 secondsHow to use this
- 1Enter employee base salary ($/yr).
- 2Enter payroll burden (%) — Taxes, benefits, insurance.
- 3Enter equipment & software per year ($).
- 4Enter recruiting cost ($).
- 5Enter expected tenure (yrs).
- 6Enter billable hours the employee delivers (hrs/yr).
- 7Enter contractor rate ($/hr).
- 8Enter hours of work you actually have (hrs/yr).
- 9Read your break-even hours per year on the right — it updates as you type.
- 10Hit Share to keep the scenario or send it to someone.
About this calculator
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.
Worked example
Using the values the calculator loads with:
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
Results
- 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): -$14,680.00
What each field means
Inputs
- Employee base salary ($/yr)
- The employee base salary used in the calculation, measured in $/yr. Starts at 82000 $/yr so you have a working example on load.
- Payroll burden (%)
- Taxes, benefits, insurance
- Equipment & software per year ($)
- The equipment & software per year used in the calculation, measured in $. Starts at 3600 $ so you have a working example on load.
- Recruiting cost ($)
- The recruiting cost used in the calculation, measured in $. Starts at 9000 $ so you have a working example on load.
- Expected tenure (yrs)
- The expected tenure used in the calculation, measured in yrs. Starts at 3 yrs so you have a working example on load.
- Billable hours the employee delivers (hrs/yr)
- The billable hours the employee delivers used in the calculation, measured in hrs/yr. Starts at 1380 hrs/yr so you have a working example on load.
- Contractor rate ($/hr)
- The contractor rate used in the calculation, measured in $/hr. Starts at 78 $/hr so you have a working example on load.
- Hours of work you actually have (hrs/yr)
- The hours of work you actually have used in the calculation, measured in hrs/yr. Starts at 1200 hrs/yr so you have a working example on load.
Results
- Break-even hours per year
- Returned as a whole number and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Employee all-in annual cost
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Employee cost per billable hour
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Contractor cost at your demand
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Employee saving vs contractor (negative = contractor wins)
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
Why is the employee's cost per billable hour so much higher than their hourly salary?
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.
What non-cost factors should override this math?
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.
Should I include management time?
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.
How does classification risk factor in?
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.
Accuracy and 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.
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Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). Freelancer vs Full-Time Hire Cost Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/agency-freelancer-vs-hire
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/agency-freelancer-vs-hire" target="_blank" rel="noopener">Freelancer vs Full-Time Hire Cost Calculator — RevenueLab</a> (2026).</p>
Source: [Freelancer vs Full-Time Hire Cost Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/agency-freelancer-vs-hire) (2026).