Enter one salaried role and one freelance/contractor rate for the same work. We adjust for employer payroll taxes, benefits, overhead, and paid time off to show the real cost per productive hour.
⚠ Estimates only, not financial or legal advice — see the note below the results for details. US employer perspective.
A W-2 employee you hire, pay payroll taxes on, and provide benefits to.
A 1099 contractor you pay a rate to for the same work, with no employer payroll tax or benefits obligation.
Each line already includes every adjustment above it — this isn't a list to add up. Compare using the bottom line only.
Estimates only, not financial or legal advice. Employer payroll tax uses the 2026 employer share of FICA: 6.2% Social Security (up to the $184,500 wage base) + 1.45% Medicare (uncapped), plus your entered unemployment insurance and workers' comp figures. The final line divides by productive hours — for the employee, standard work hours minus paid days off (at 8 hours/day); for the freelancer, billable hours directly, since freelancers are typically paid only for hours actually worked. This avoids double-counting paid time off as both a dollar cost and an hours reduction. It doesn't model 1099 worker-classification risk, hiring/severance costs, or the value of flexibility and reduced management overhead that often favor one option over the other.
Hire Employee vs Outsource takes one salaried role and one freelance rate for the same work and runs each through four stages to estimate the true cost per hour of work actually delivered.
Employee starts from annual salary. Freelancer starts from hourly rate multiplied by the billable hours you'd actually need to cover the same workload.
An employee triggers the employer share of FICA (Social Security and Medicare), plus federal and state unemployment insurance. A properly classified 1099 freelancer triggers none of these — the business simply pays the invoiced rate.
Employees typically come with health insurance contributions, retirement matching, workers' compensation insurance, and equipment or workspace costs. Freelancers usually cover their own equivalents — though you can add any tools or software you provide them here.
A salaried employee is paid for their standard work hours even on days they don't work — holidays, PTO, sick days. A freelancer is typically paid only for hours actually billed. Dividing each side's total cost by the hours of work actually delivered puts both options on the same real, comparable footing.
No. Hire Employee vs Outsource gives a directional estimate to help you think through a staffing decision, not a substitute for an accountant, employment attorney, or payroll provider. Worker classification rules are legally significant — misclassifying an employee as a 1099 contractor can carry real penalties, and that determination depends on the nature of the working relationship, not just cost.
The employer FICA share (6.2% Social Security up to the $184,500 wage base, plus 1.45% Medicare with no cap) is set by federal law and applied automatically. The $300 unemployment insurance default reflects a common ~2.7% new-employer state rate applied to a representative wage base, plus the federal net FUTA rate of 0.6% (after the standard 5.4% credit) on the first $7,000 of wages — actual SUTA rates and wage bases vary enormously by state, from a $7,000 wage base in several states to $72,800 in Washington.
$7,900/year reflects KFF's 2025 Employer Health Benefits Survey, which found the average annual premium for single coverage was $9,325, with covered workers contributing an average of 16% ($1,440) — leaving an average employer contribution of roughly $7,885/year.
Workers' compensation rates are priced per $100 of payroll and vary enormously by job risk — from about $0.20–$0.50 for clerical/office work up to $20+ for high-risk trades like roofing, according to NCCI classification data. The default of $0.50 assumes office or professional services work; the national all-industry average is closer to $1.03 per $100 of payroll, so adjust upward for higher-risk roles.
Paid time off is already included in the employee's salary — it isn't a separate expense. Instead, it reduces the hours of actual work you get for that salary. Treating it as reduced productive hours (rather than also adding a dollar figure for it) avoids double-counting the same cost twice.
This tool covers well-documented direct costs: payroll taxes, benefits, overhead, and paid time off. It doesn't price in 1099 misclassification risk, the cost of severance or unemployment claims if an employee is let go, recruiting and onboarding time, the value of schedule flexibility a freelancer offers, or the management and quality-control overhead some businesses find higher with contractors. These matter, but vary too much by business to estimate responsibly here.
Tax-year data: 2026