Contractor vs Employee Cost Calculator
Compare what the same work costs as a W-2 hire versus a 1099 contractor. This compares cost only. Whether someone can legally be a contractor depends on how the work is controlled, not on which is cheaper. See how to tell the difference.
Estimate only, not legal or tax advice. Misclassifying an employee as a contractor can bring back taxes, penalties, and interest.
Why contractor rates look high
A contractor pays both halves of Social Security and Medicare as self-employment tax: 15.3% on 92.35% of net earnings (IRS). They also cover their own equipment, insurance, unpaid admin time, and gaps between clients. A contractor rate well above the equivalent wage is normal.
For payments made in 2026, you generally file Form 1099-NEC for a contractor you pay $2,000 or more in the year (raised from $600; see IRS).
Whether someone can legally be a contractor depends on how the work is controlled, not on which option is cheaper. See how to tell the difference.
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FAQ
Can I choose to make a worker a contractor to save money?
No. Classification follows the facts of the relationship, mainly who controls how the work is done, under IRS and Department of Labor tests. Cost is not a factor.