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
Result
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
$52.00
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How to use this
- 1Enter employee base salary ($).
- 2Enter benefits + payroll tax load (%).
- 3Enter overhead (equipment, office space) ($).
- 4Enter contractor hourly rate ($).
- 5Enter hours of work needed per year.
- 6Read your lower total cost option on the right — it updates as you type.
- 7Hit Share to keep the scenario or send it to someone.
About this calculator
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.
Worked example
Using the values the calculator loads with:
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
Results
- 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: $52.00
What each field means
Inputs
- Employee base salary ($)
- The employee base salary used in the calculation, measured in $. Starts at 70000 $ so you have a working example on load.
- Benefits + payroll tax load (%)
- The benefits + payroll tax load used in the calculation, measured in %. Starts at 28 % so you have a working example on load. Accepted range: 0–60 %.
- Overhead (equipment, office space) ($)
- The overhead (equipment, office space) used in the calculation, measured in $. Starts at 4000 $ so you have a working example on load.
- Contractor hourly rate ($)
- The contractor hourly rate used in the calculation, measured in $. Starts at 65 $ so you have a working example on load.
- Hours of work needed per year
- The hours of work needed per year used in the calculation. Starts at 1800 so you have a working example on load.
Results
- Lower total cost option
- Returned as a plain value and shown as the headline result. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- W-2 employee total cost
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- 1099 contractor total cost
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Annual difference
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
- Contractor rate that breaks even
- Returned as a money amount in US dollars. It recalculates instantly whenever you change an input, so you can compare scenarios without reloading.
FAQ
Is misclassification a real risk here?
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.
Does this include hiring and turnover cost?
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.
What benefits load is typical?
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.
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.
Related tools
Cite this calculator
Writing about this topic? Grab a citation — every link helps keep these tools free.
RevenueLab. (2026). W-2 Employee vs 1099 Contractor Cost Calculator. Retrieved from https://www.revenuelab.fyi/toolbox/w2-employee-vs-1099-contractor-cost
<p>Source: <a href="https://www.revenuelab.fyi/toolbox/w2-employee-vs-1099-contractor-cost" target="_blank" rel="noopener">W-2 Employee vs 1099 Contractor Cost Calculator — RevenueLab</a> (2026).</p>
Source: [W-2 Employee vs 1099 Contractor Cost Calculator — RevenueLab](https://www.revenuelab.fyi/toolbox/w2-employee-vs-1099-contractor-cost) (2026).